STUDENT LOAN COMPLAINTS

Your Emails: American Education Services (AES) Complaint

2009-04-02T21:00:00.000-07:00

Hi There,

I am so happy to see your site up.

I have contacted the BBB and Attorney General in regards to AES of Pennsylvania.

My private loans were sold to this company who, so far, have been incompetent, rude, and generally disassociated with anything or anyone. In April, the last month of a foreberance I took after college because, as we all know, the economy is not great for "straight out of college careers", I was informed by a representative that my foreberance time was up, and I only qualified for a graduated repayment plan which would cut my bills in half, starting in May. I thought, "Heck, I can deal with $179.64 a month.". That is not what happened. It was determined that I actually had more foreberance time left AND that the rep used it while I was sending in the paperwork to get the graduated status(which took THEM two weeks to approve after I FAXED over the documents). They claim that the fax has many users and that the number provided is the main fax, so my documents could have been lost.

Next, my co-signer, my 67 year old handicapped grandmother, has been receiving calls over me, the actual documented loan holder, scaring her and saying that she has to pay my overdue balance of $500 or her credit will be ruined too! She is now upset along with my family who think I am just ignoring the situation!

When I called AES, I assured them that I was one of those people who try to get over on things. I WANT to pay for my college education! I have tried to make arrangements to get things cleared up, and the only response I get is that a collection agency will be contacting and suing my grandmother and I if I don't get these payments in full over to them even though I haven't received a raise or anything that would help with that. One rep asked me to ask my employer for a loan! It's absurd!

When I told a rep that I was filing a complaint with BBB and the attorney general and that I would like to have our recorded conversation, he said I would never get that information. I thought they used those for "quality assurance purposes".

My account is now delinquent and continually garnering late fees, interest fees, and collection fees. I have sent payments periodically, but until the full balance is due, my grandmother and I will continue to ignore our phones for now because according to one rep, Josh x7447, there is no more to say. You pay: period.

Thanks so much for having a place to vent. I hope my story will help someone down the road.

Best,

Thurcia

Your Emails: AES: Dishonest, unfair & outright fraudulent! We need to fight back!

2009-04-02T20:36:00.001-07:00

I was so glad to find this site. I too have had numerous problems with AES. Again, my credit is damaged due to their poor business practices.

The most recent problem comes after I requested that my terms be adjusted to a graduated payment. I was told that I need not make a payment in Dec. In January, after I made my payment, I received notice of payment delinquency (from December), I contacted AES on January 29 and was told that the error was theirs. They stated that there was an error when the account was updated and that the person who updated the account had failed to take the necessary measures to update the account in a manner that would reflect that the December payment had been made. Again, I was assured that I did not owe the December payment & that everything had been taken care of and I would receive no further notices. I was apologized to for the inconvenience it had caused me.

On March 2, I received a notice from a collection agency on behalf of AES/National Collegiate Trust. For the 3rd time, I contacted AES. Only this time I was told that I am responsible for interest & Late fees & the payment from December! I was told at this time that the December payment was not eligible for forgiveness due to no forbearance time left on the account. This was the first time anyone mentioned the need for forbearance time to relieve 1 payment! I have consistently been told I was not responsible, Why all of a sudden should I be held accountable for their error. I have no problem making the payment (if it is tacked onto the end of the loan as I can't afford to make the payment at this time.) I do not feel that my credit should suffer, nor should I be liable for late fees, etc. This was not an omission on my part, I had planned to make the payment!

As I stated before, this is the most recent of many problems I have had with AES; Pulling my loan out of forbearance 3 months early & not notifying me, then turning the account over to their attorney; Astronomical interest accrual and failure to prove to me as requested the interest rates, etc. over the period of time requested. Payments posted incorrectly, leading to even more interest payments,etc. The list would make this e-mail 3 times as long as it already is.

I am ready to fight back! Almost 8 years of this is ENOUGH! What I want to know is if anyone is aware of a class action attorney who might be interested in picking up a case against AES. I plan to research it. If I find, I will post.

Your Emails: Sallie Mae Servicing - Loanshark/Beyond Predatory Lender

2009-04-02T20:34:00.001-07:00

My loans are consolidated with Sallie Mae. Sallie Mae has added per a recent conversation with one of their customer service reps $15,000 in interest to my student loans in approximately in a 7 year period. I recently started paying on my loans on Sallie Mae's graduated plan. I have a due date for the 28th of the month, but because I pay Sallie Mae earlier than that date I am told I am being charged additional interest on my account. Further, Sallie Mae are showing my loans in my credit file as if I owe two loans instead of one. They are not showing all the original lenders as paid in full even though Sallie Mae was suppose to pay off those original lenders they have listed them as if the information on those lenders are not available and they don't know their phone numbers or the balances, which is impossible since Sallie Mae is the one that paid all those initial lenders off in full. In one of my credit files Sallie Mae is listed on all my loans and have taken the original lender off. In another credit file Sallie Mae show me owing them $58,000 and $66,000 when I have only one consolidated loan with Sallie Mae. Students need to get together and protest and March until our government stop this insane abuse of student loan practices by lenders.

Sallie Mae has not reported my monthly payments to the credit agencies. I have not as of today received a requested written statement from Sallie Mae of my account. Sallie' Mae's customer service told me I had to have either a coupon book or a statement, but I could not have both. While I am paying Sallie Mae the agreed on payments on my loan and before my due date. Sallie Mae tells me the interest on my loans a increasing because I pay earlier than the due date via mail.

The interest on these loans are more than the entire initial loan and near impossible to pay because of the huge amount of interest, which Sallie Mae says accrues daily

The consequences of these loans were never explained properly when taken out. Lenders like Sallie Mae are taking advantage of t he poor, the uninformed, and those simply wanting to better themselves by pushing these bloodsucking loans on to unsuspecting students when the bulk of these students will end up with nothing but degrees in fields where there are no jobs to be had and a loan it will take them the rest of their life to payoff working in jobs slightly paying more than minimum wage.

The interest on all student loans should be frozen for at least 5 years to give students an opportunity to bring down the principle on these loans. The Government should allow students to discharge the interest on these student loans in bankruptcy since the lenders are collecting more than their fair share of interest. The Government should allow lenders to charge only a flat rate of interest on student loans and not compound the interest daily. .

Your Emails: Student Loan Scams - We Need To Take Action

2009-04-02T20:33:00.000-07:00

To Whom It May Concern,

I am writing this letter to let you know about borrowers who have been hurt in taking out Student Loans to go to college and make better lives for ourselves. I am a victim myself. I went to The Art Institute of Pittsburgh (Online Division) from July 2004 - March 2007. I graduated from there with my Associates Degree in Graphic Design and to this day, I still have not found any work in my field due to the economy being so bad. I had to defer my student loans twice because I am a single woman struggling to make it on my own. I waitress and have a lot of expenses to pay for every month. I originally took out a loan for $30,796.69 but after graduation I was told by Sallie Mae that it would be better to consolidate all of my student loans. But they never told me how much interest they were going to charge me. After consolidating all of my loans and having to defer them due to economic hardship, the accrued interest to be capitalized is $1,020.66 making the total principal $31,817.35. Then the estimated amount of interest that they are charging me during repayment is $21,591.89. So the grand total that Sallie Mae says I owe them is $53,409.24! Then I was approved for deferment and then they told me that I will be charged even more interest just for being in deferment. And also I still owe $366.44 to the college I went to and I still don't have my degree in my possession. They will not send it to me until the full balance is paid off. I am just trying to survive with the little money I am making right now.

I did find a website www.studentloanjustice.org and found out that there are millions out there who have also been hurt with taking out these Student Loans. After reading these stories, I think that it is a shame that we American citizens are being taken advantage of this way. All we were trying to do was to make something of ourselves and to better our lives. This is why we decided to go to college. But due to the economy, none of us are working in the fields that we went to school for and we are all responsible for paying back our loans. But why should we have to be charged more than what we borrowed for interest? Why is Sallie Mae doing this to us?

I want to take a stand against this because we are all innocent victims who are crying out for help. Someone needs to do something about this. Any questions regarding this matter, you may contact me at cominalive77@yahoo.com

Your Emails: AES Victim

2009-04-02T20:31:00.000-07:00

Hi,

My name is Marta Stepanowicz and AES is making my life a living hell. My loans were originally taken out with a different lender and later were sold to AES without my knowledge. These have the rudest and most incompetent people working there. I tried doing forbearance and have not consolidated with them (thank god) and they try making excuses and stories on how they would deny me every time. My income does not come close to alllowing me to make the $700 per month payment. I am very frustrated because I think that the FTC and Attorney General in Pennsylvania need to investogate them to the fullest extent. I found pages of stories filled with customers complaints about this monstrous company. I think all these complaints should be made public and I intend to do that with the FTC.

Knowledge is power and if I had known this about his company 7 years ago, then all of this could have been prevented. I am sure alot of people going through this nightmare feel the same way. Everyone has to abide by rules and regulations and this company is no different.

Marta Stepanowicz

Your Emails: Forged Promissory Note

2008-04-24T21:09:00.000-07:00

I made a telephone inquiry regarding consolidating default student loans to relieve the $600 a month payments I was being recinded from my paycheck.

American Education Serivces (AES) just contacted my employer stating I am in default of a consolidated loan I took out with them. I just received the original promissory note which does not have my signature, or a date and was completed by the person I made the inquiry with. Who can I contact regarding this?

Thank you.

Your Emails: "Struggling With Sallie Mae"

2008-04-24T21:08:00.000-07:00

I am struggling with trying to set up a payment arrangement with Sallie Mae.

I have, through a bit of time on the internet, discovered that this is not the best place to have to deal with. I did not have my loans through them originally. My loans have been sold to the best of my recollection, at least 4 times. And, they ended up at Sallie Mae. (First Wisconsin Bank, to Great lakes Higher Education to someplace in Arizona, notw to Sallie Mae. There may be more in the middle!).

I have been through divorce and bankruptcy recently. My bills (without the loans) at this point, amount to over $2,000 a year MORE than I take home. (with the payments, if I cannot work out something, I will be $6,000 or so in the red!). Every year, I hope things will get better. Every year, it gets worse. I cant even keep up with dental work for my kids (with insurance!) or for myself.

I applied for income sensitive repayment. Got a note that said instead of having a payment of $405 a month, I would have to pay only $326! Wow, that is a big help. I have a job. I also have a car loan at 21% due to the bankruptcy; and I pay an extra $500 in rent each month because of my Ex. I ended up in bankruptcy because my wages were being garnished for his bills. Marital property laws SUCK, and are punitive in some situations.

I have written Sallie Mae again, trying to explain my situation. I do not have any hope that it will help. I am 48 years old. My life did not go the way I had planned. I went to school to NOT have to live like this. Ironically, it has actually made my life worse....

I will never own a home, or get to retire. I will be one of those little old ladies, greeting customers at the front door of WalMart, until the day I die. Because I thought that getting a college degree was going to HELP me!

I am also trying to get the original info on my loans, but that looks hopeless as well....

I do not understand how it has come to this. They have all the power. It does not seem as though there is any recourse. And, since forcing me into default is financially more attractive to them, why would they want to help?

Your Emails: "AES May Have The Worst Customer Service"

2008-04-24T21:06:00.000-07:00

As a borrower from American Education Services (AES) and finally getting my defaulted student loans after financial hardship into rehabilitation, I felt this story was pertinent to future borrowers. I admit that I screwed up and wasn't paying all my student loans on time, but was able to get my Federal Loans into rehabilitation and up to date, yes! They were great to work with, the ladies were so nice, understanding on the phone and they worked with me to create an affordable repayment plan.

Then I tried dealing with the ladies from AES. I think someone should get them a day at the spa because they are all complete ignorant, miserable women. I've talked to three different women and they all were completely rude ot me over the phone. Last time I noticed I was paying them money every month and essentially am a customer of theirs, right? Well they need some training in manners for "listening" and customer service skills. The first lady had me on the phone 3 times in one day and for an hour at a time, arguing, talking over me, talking to me in a condescending manner; you name it she didn't want to hear it and she didn't listen to anything I was trying to explain to her why I couldn't afford to pay her $3,500 that day. She threatened to call my employer and pull money from paychecks. So I had to give her 10 checks in a row for ACH. My phone call with Federal Student Loans took me 15 minutes ... Something wrong there?

Just today I spoke with a girl named Andrea and she told me that it was in my best interest to pay off my $2,900 balance right now to get it out of default. After I logged in and explained that my online account said my balance was $0.00, she said you don't have online access to your account. Does that make sense? Then I said I'd like to lower my monthly payments before I sign this letter that states you're going to roll $500 of collection fees into my principal. She said, "We can keep taking $300 out of your account, but you paid 8 in a row ontime and with one more you're eligible for rehabilitation" Really? So the fact that I had been on-time didn't warrant a little more human emotion from this lady. Do these people work in a dark room in the middle of Pennsylvania somewhere? Someone send them flowers or something. As she tried to go back into how paying it today would be better for me after I told her I wasn't able to; I decided to pay my last collection payment and call back in a month to hopefully speak to someone with a heart. Even when you do pay on-time, the women of American Education Services (AES) are kind of like praying mantis, they eat their own kind, other human beings trying to get by and correct the wrongs of their past.

Forged Promissory Note?

2008-03-02T20:05:00.000-08:00

Has anyone reading this ever had a problem with a loan company such as ACS, CFS Suntech/CHASE, Sallie Mae etc. actually forging a promissory note for a loan/consolidaton? If someone working for a loan company has forged your name on a promissory note (either hardcopy or online "e-signature"), or if you have any information on such forgery practices, please email me @

studentloancomplaints@yahoo.com

Your Emails: 10 Years and Still Paying

2008-01-23T10:01:00.000-08:00

We have been paying on our loans for over 10 years, and in all that
time only 12% of our payments were ever applied to the principal.
We have paid off 4 vehicles, 4 hospitals, 1 home, 15 doctors and
several animals - because you can pay ahead or pay extra on the principal --
BUT NOT ON STUDENT LOANS!!! THEY DO NOT HAVE TO APPLY ANYTHING TO THE PRINCIPAL FIRST - they can legally apply to their fees and interest and charges first - It is a sick rigged rip-off intended to create debts that can never be paid off!!! AND BILL f'ing CLINTON privatized it all so that his buddies could build themselves a private golf course...Hell, we owe more now than when we started paying the damn things!!!

So much for 'family values', the importance of education, and all that
other crap...

Your Comments: AES/ DEFERMENT REQUESTS

2007-12-20T21:35:00.000-08:00

I am currently in AES hell - have been for 2 years now. I got pregnant and had to leave school to have my child - I got the 6 month grace period and then they started hounding. I applied for a deferrment because I was pregnant and had a high-risk pregnancy and could not work or afford the payments. It was a run around - my Dr had to fax them forms and then she would and then they would say they had not received them. This went on for about a month - all while they are threatening to report me for non payment, etc. Finally I sent a letter return receipt requested with all the forms, threatening to tell the Attorney General about them, and suddenly I was deferred - imagine that.

But they would only give me the 6 week post partum because I had an emergency c-section - then it was back to the harrassing. I had to stay home with my baby due to her health problems and the fact that daycare is so expensive here, so I filed for an economic hardship forbearance - by the end of that, I had to file for food stamps to get them to grant me a measly 6-month deferrment (mind you, all the time I spent battling them counted in this, so really it only ended up being a 4 month deferment.

It is now up and I requested the usual forms to defer again - after they ignored my emails for a week, I finally got an email saying I've maxed out my deferment time - WHAT?! All my other loans give you 3, 1 year deferments before you have maxed! I'm furious and asked them to provide me a link ontheir site where it states this. I'm getting ready to contact the attorney general and BBB on them, they have horrible communication and misleading practices.

Your Emails: AES / Deferment Requests

2007-12-01T22:29:00.000-08:00

Thank you for this website. I too am living the student loan nightmare. I am a parent who has cosigned for student loans for my son. His requests for deferrals and hardship forbearance since he is still in medical school have been ignored and I receive phone calls daily from PHEAA threatening to ruin my credit rating if I do not make payment. I am filing a complaint with the Attorney General for the state of Michigan. I do very much appreciate the links you provided. I feel like crying but I don't have any more tears.

Your Emails: Sallie Mae / Loan Forgivness

2007-11-30T19:58:00.000-08:00

My husband and I are both teachers in the state of Oklahoma . We met in college and both had student loans. My husband had much more debt than I. He had Perkins and Stafford Loans. Upon our marriage and subsequent graduation from college we began teaching. We started to have to pay off two loans to Sallie Mae, which we couldn’t afford. Then they offered us the chance to consolidate our loans, which we gladly accepted. We have both taught in high poverty schools now for over ten years. My husband was told that his Perkins loans (app. $10,000) would be forgiven in certain percentages for each year taught. So about a year ago, after having taught for a long time we decided it was time to take the state up on their forgiveness of the Perkins Loan. We contacted Sallie Mae which told us to fill out a form, we did and said we were not eligible. One year later, hours and hours of phone calls, and several trips and phone calls with our state dept. of education- still no forgiveness.

This is what they are saying- The state of Oklahoma is willing to pay for the loan, they say will meet all qualifications. Sallie Mae says they will not accept the payment because we don’t qualify. This is their reasoning. They said that when we consolidated our loans, our individual loans ceased to exist, and that is why our claim isn’t valid. I asked them to show me in our paperwork where there was a statement to that effect-none has been provided. If the people giving the money are willing to pay, what is the problem? Their greed, poor communication, and lack of common sense is amazing.

I am at my wits end about what to do. The injustice of it all makes me sick. I am going to fight this, all the while, dutifully paying my monthly payments! Any help you can provide or attention to this problem would be greatly appreciated.

Student Loan Company Aims to Stop the Deception

2007-07-11T10:22:00.000-07:00

Nonprofit Student Assistance Foundation gives straight answers to students seeking loans and grants

Helena, MT (PRWEB) June 18, 2007 -- Before various lawsuits and complaints regarding deceptive student loan advertising came to light earlier this year, Student Assistance Foundation launched a new Web site to deflect deception and offer students a place to get their questions about student borrowing answered honestly. Stop the Deception is the nonprofit student loan company's latest effort in giving students straight and truthful answers when it comes to the often-confusing subjects of student loan debt and consolidation.
"It's particularly important for graduates to read the fine print to make sure they fully understand the terms of the loan and to make sure the company they choose has the customers' best interests in mind," said Jamie Lee, loan sales supervisor at SAF. "This site helps students to do that."
According to Lee, SAF intends to continue to expand the site to identify confusing practices in the student loan industry as they come into play in order to help students negotiate the loan process successfully.
Students may be confused and misguided about many aspects of managing and paying off private or federal student loans. Since most college loans are repaid after graduation, students may not be able to perceive the reality of their debt and engage in careless spending without consequences throughout college years. Students can get caught up in using loan money for items outside of legitimate school expenses -- like trips or pets, for example. Students are sometimes led to believe they can borrow unrealistic amounts that are far above what they can repay in a reasonable amount of time. Later in the life of the loan, when it comes time to consider student loan consolidation programs, students can become even more confused.
Student Assistance Foundation offers several tips to help stop the deception:
Find someone you trust. Ask friends and family what they've done. Then find a trusted, knowledgeable lender with good customer service.
Set a budget and stick to it. Learn what you can afford to borrow and don't exceed it. Then keep a record of how you intend to spend your loan.
Do your research. If it sounds too good to be true, it probably is. Look into as many lenders as you can to compare and contrast their services and gauge their commitment to the customer.
Get out of prison. Think of student debt like it's a prison and make it a priority to get out as soon as possible.
Know your benefits and rates. Some low rates apply to only a few people and some benefits get pulled easier than you think. Know the terms and conditions of all money you borrow.
Start repayment on time. Don't put off repaying your student loans. Get into the habit of making more than the minimum payment.To get straight answers about student loans visit http://www.stopthedeception.org/ or call Student Assistance Foundation at (800) 852-2761 ext. 9750.

(Source: http://www.emediawire.com/releases/2007/6/emw533832.htm)

Student Loans Raising More Than Blood Pressure - Opinion

2007-05-01T20:18:00.000-07:00

Student Loans Raising More Than Blood Pressure - Opinion

Kennedy requests information from Sallie Mae

2007-04-28T19:55:00.000-07:00

Washington Business Journal - 1:51 PM EDT Friday, April 27, 2007
by Neil Adler
Staff Reporter

Sen. Edward Kennedy, D-Mass., has requested information and documents from Sallie Mae and another student lender because of concerns about their collections process and the possible use of tactics prohibited by federal law and regulations.
Kennedy, chairman of the Senate Health, Education, Labor and Pensions committee, sent letters April 26 to Tim Fitzpatrick, CEO of Reston-based SLM (NYSE: SLM), commonly known as Sallie Mae, and Michael Dunlap, chairman and CEO of Lincoln, Neb.-based Nelnet (NYSE: NNI).
In the letter to Fitzpatrick, Kennedy wrote: "Specifically, I am concerned that several private lenders may be engaging in harsh and inappropriate tactics with regard to borrowers whose payments are overdue and or whose loans are in the collections process, tactics that are prohibited by federal law and regulations."
Kennedy says that his office has obtained information that Sallie Mae, which has agreed to be acquired by a private investor group for $25 billion, may have engaged in practices such as:
Attempting to collect debts not owed.
Firing employees who attempt to help borrowers obtain correct information about their loan status.
Instructing employees to give borrowers "the run around" rather than provide them with correct information on their loan status.
Intentionally sending loan payment notices to an incorrect address to force a borrower's account into default.
Sallie Mae will cooperate with Kennedy's request for information but doesn't like the way the inquiry has been handled so far, says company spokesman Tom Joyce.
Kennedy's office never contacted Sallie Mae about the senator's concerns, "even though we have been in regular contact with his staff," Joyce says. "In fact, the media received this letter before we did. It raises the question as to whether the facts are important in this inquiry, and whether the matter has been prejudged."
Sallie Mae's work, along with that of others in the student loan industry, has helped push default levels to "record lows" and assisted borrowers with keeping healthy credit records, Joyce says.
In Kennedy's letter to Dunlap, he wrote that his office received information indicating the company may have violated federal law and regulations by refusing to provide loan and payment history information to defaulted borrowers and inappropriately consolidating loans without the borrower's consent.
Nelnet officials couldn't be reached for immediate comment.

Source: http://washington.bizjournals.com/washington/stories/2007/04/23/daily53.html

Lenders Misusing Student Database

2007-04-25T12:41:00.001-07:00

Improper Searches Raise Privacy Fears

By Amit R. Paley Washington Post Staff Writer
Sunday, April 15, 2007; A01

Some lending companies with access to a national database that contains confidential information on tens of millions of student borrowers have repeatedly searched it in ways that violate federal rules, raising alarms about data mining and abuse of privacy, government and university officials said.
The improper searching has grown so pervasive that officials said the Education Department is considering a temporary shutdown of the government-run database to review access policies and tighten security. Some worry that businesses are trolling for marketing data they can use to bombard students with mass mailings or other solicitations.
Students' Social Security numbers, e-mail addresses, phone numbers, birth dates and sensitive financial information such as loan balances are in the database, which contains 60 million student records and is covered by federal privacy laws. "We are just in shock that student data could be compromised like this," said Nancy Hoover, director of financial aid at Denison University in Ohio.
Education Department spokeswoman Katherine McLane said the agency has spent more than $650,000 since 2003 to safeguard the database. The department has blocked thousands of users that it deemed unqualified for access after security reviews, McLane said, and it has blocked 246 users from the student loan industry for inappropriately accessing the data.
In general, the department allows lenders to search records in the database only if they have a student's permission or a financial relationship with the student.
The department has been "vigilant in its monitoring for unauthorized uses" of the database, McLane said.
Concerns about possible abuses of the database are emerging as the student loan industry is under investigation by congressional Democrats and the New York attorney general. Critics say the $85 billion-a-year industry has cozied up to government and university officials who are in a position to help lenders.
This month, a previously obscure Education Department official named Matteo Fontana was suspended after the revelation that he owned more than $100,000 worth of stock in a student loan company while he worked in a unit that helped oversee the industry -- and the student loan database. The stock holding raised questions about a possible violation of conflict-of-interest rules.
The database, known as the National Student Loan Data System, was created in 1993 to help determine whether students are eligible for student aid and to assist in collecting loan payments. About 29,000 university financial aid administrators and 7,500 loan company employees have access to it.
In a recent meeting with university financial aid directors, Theresa S. Shaw, chief operating officer of the department's Office of Federal Student Aid, which manages the database, said lenders have been mining it for student data with increasing frequency, according to three participants at the meeting. In the department's hierarchy, Shaw ranks above Fontana.
"She said the data mining had gotten out of control, and they were trying to tone it down," said Eileen K. O'Leary, director of student aid and finance at Stonehill College in Massachusetts, who was at the Feb. 26 session. "They'd seen the mining for a few years, but now they felt it had grown exponentially."
The department first started noticing a problem in mid-2003 when loan consolidation became more popular, according to an agency official who spoke on condition of anonymity because of the sensitivity of the matter. As companies began to aggressively look for low-risk borrowers to target for consolidation plans, they turned to the database for prospective customers, the official said.
Database users can view only one student record at a time, and the department can monitor each time they view an entry. "When we see them go in and out very quickly, that's when it raises flags" about data mining, the official said. Such abuse would violate department rules.
Officials grew so concerned that in April 2005, the department sent out a letter to database users warning that inappropriate use of the system -- in other words, looking for information without authorization -- could cause their access to be revoked. The letter said the agency was "specifically troubled" that lenders were giving unauthorized users -- such as marketing firms, collection agencies and loan brokerage firms -- the ability to access the database.
"Information may not be used for any other purpose, including the marketing of student loans or other products," wrote Fontana, then general manager of a unit in the department that oversaw the lending industry.
In August 2005, Cathy H. Lewis, the department's assistant inspector general, echoed those concerns in a memo to Shaw that warned of security problems with the database and the lack of regular audit trails on the system.
Through a spokeswoman, Shaw declined to comment. Fontana did not return telephone calls.
After the warnings, inappropriate usage of the system seemed to decline, according to the department official who requested anonymity. But several months ago, top managers learned that the practice had resumed -- "a pattern that's very alarming," the official said.
Some senior education officials are advocating a temporary shutdown of access to the database until tighter security measures can be put in place, the official said. McLane confirmed that such deliberations are taking place.
It is not certain that the lenders that inappropriately used the database used information from it to market directly to students. Credit bureaus, for instance, also hold personal information on borrowers that can be used to solicit customers.
But department officials believe lenders are probably using the database for marketing, according to three current and former agency employees who spoke on condition of anonymity for fear of retribution. Some university financial aid administrators suspect loan companies are probably targeting students in the database who take out loans directly with the government, known as direct loans.
"The database is being misused by the industry to raid the direct loan portfolio," said Craig Munier, director of scholarships and financial aid at the University of Nebraska at Lincoln, who was at the meeting with Shaw. "It's certainly a misuse of the intended purpose of the information and was certainly not what we intended in the higher education community when we built" the database.
Some financial aid directors say abuse of the database would explain why some students who have taken out loans only directly with the government are deluged by up to a half-dozen solicitations a day from private loan companies.
"Our students are being inundated with marketing from consolidation companies," said O'Leary, of Stonehill College. "How else are the consolidation companies getting our students' information?"
Some financial aid administrators hope inquiries into the student loan industry will extend to the possible abuse of the database.
"We are hoping that a full congressional investigation can happen," said Hoover, the Denison aid director, who also met with Shaw. "And maybe then we will find out what's really happening."

Source: http://www.washingtonpost.com/wp-dyn/content/article/2007/04/14/AR2007041401444_pf.html

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Be Wary of Loan Letters

2007-04-24T22:42:00.000-07:00

Official-looking mailings can bamboozle students
By Kimberly Palmer
Posted 4/8/07
Jessica Coulter, a first-year law student at Regent University in Virginia Beach, Va., worried when she started getting letters marked "confidential" and "open immediately" in the mail shortly after taking out student loans. Because they looked official and time-sensitive, she assumed they were from her loan company. When she opened them, she found information about loan payment programs, some of which suggested immediate deposits. "I got really scared. I thought the whole point of loans was that you don't pay them back for three years," she says.

After consulting classmates with student loans, Coulter learned that the letters were just advertisements. Now, they quickly go from her mailbox to the trash. But she is hardly the only one fooled by such letters.
Hard sell. According to student loan borrowers and consumer advocates, loan companies increasingly send solicitations that resemble actual loan documents or government-issued letters. "Direct-to-consumer marketing for student loans has exploded," says Luke Swarthout, higher education advocate for U.S. PIRG, a public interest advocacy group. "We're seeing the propagation of these types of aggressive, sometimes misleading mailings."
Rebecca Thompson, legislative director for the U.S. Student Association, says students are especially vulnerable to such solicitations. "It's confusing for the average student ... especially if it is the first time they have ever taken out a loan," she says, adding that many students don't know which loan company they are actually using.
Collegiate Funding Services, part of JPMorgan Chase, sends solicitations marked "final attempt" in red on the envelope. The letter inside says it is from the "Student Loan Department" and bears an insignia with a book and leaves inside a circle within a circle. The federal Education Department's insignia is a tree within a circle inside a circle.
Swarthout expressed concern that such an insignia could be confused with that of the Department of Education. He also takes umbrage with the first sentence of the letter, which reads, "We're writing to make sure you are aware that if you don't contact us now, you could end up paying significantly more on your monthly student loan payments than necessary." While Swarthout acknowledges that the statement could be true, because the company offers loan consolidation services, he says consumers could interpret it as meaning they have to call or their current rates could go up.
Greg Hassell, spokesman for Collegiate Funding Services, says that the letter is not deceptive and that there is no suggestion that it is from the government. "It's clear who it's from and what it's for," he says.
Graduate Loan Associates, a San Diego-based loan consolidation company, also stamps its letters with a circle-within-a-circle insignia that reads "Department of Student Finance." (Graduate Loan Associates did not respond to repeated requests for comment.) Letters from Class One Associates, also in San Diego, are stamped with a spread-winged eagle, a symbol often associated with the U.S. government. (The company said no one was available to comment.)
Sallie Mae, the nation's largest student loan company, sends letters marked "final notice" to potential customers, but the company says it does so only when there is an offer with a pending deadline inside, such as an expiration date for preapproved status. Tom Joyce, a Sallie Mae vice president, says, "It is, at best, misleading to use the term 'final notice' on those marketing solicitations that either have no deadline or contain no time-sensitive information. Eligible student loan customers can consolidate at any time, so anything that implies a final notice should be reserved for a pending deadline, such as an upcoming interest-rate change, or for an expiring offer, such as a special borrower benefit rebate or discount."
Joyce criticizes what he sees as increasingly aggressive and misleading materials distributed by other lenders. "I look at some of that stuff, and I'm fooled by it-and I'm in this business," he says.
Making a case. Deanne Loonin, a staff attorney at the Boston-based nonprofit National Consumer Law Center, says, "If people think they're getting [letters] from the government, then it could be an unfair business practice." To build a case against a company, a consumer who was confused by the mailings would probably have to show that emotional distress or harm was inflicted, such as signing up for loan services under a false pretense, she adds.

The Education Department's Federal Student Aid Ombudsman, which resolves disputes between federal loan lenders and borrowers, says it has received some 100 complaints about loan consolidators using marketing materials that suggest they are affiliated with the federal government. The ombudsman generally forwards such complaints to the Federal Trade Commission, the agency responsible for administering consumer protection laws. The FTC reports that it has received 583 complaints about deceptive marketing practices by student loan lenders and consolidators since 2000. One consumer filed a complaint in February after her daughter was misled into believing that a consolidator was a government agency and as a result shared her Social Security number with the company. The FTC would not say whether it was investigating student loan marketing practices.

So far, Loonin says, she knows of no cases of student loan borrowers taking companies to court for allegedly deceptive marketing practices. But that could soon change. Coulter, the law student, says, only half-jokingly, "I'll sue them in 2 1/2 years."

This story appears in the April 16, 2007 print edition of U.S. News & World Report.

Source: http://www.usnews.com/usnews/biztech/articles/070408/16loan.htm

Student loan task force launched

2007-04-24T20:51:00.000-07:00

By NANCY ZUCKERBROD
AP Education Writer

A federal task force will examine the ties between lenders and college financial aid officers amid growing concerns about student loans, Education Secretary Margaret Spellings said Tuesday.
New York Attorney General Andrew Cuomo, scheduled to testify before Congress on Wednesday, has been leading an investigation into the issue, and other attorneys general are joining him. Cuomo said Spellings' move was "too little, too late."
Cuomo says his investigators uncovered numerous arrangements that benefited schools and lenders at the expense of students. For example, investigators say lenders have provided trips for college financial aid officers who then steered students to the lenders.
The department's task force will be made up of Education Department officials. A panel of outside experts that included lenders, colleges and student representatives failed last week to agree on how the department should proceed with regulations covering relations between colleges and lenders.
Luke Swarthout, who lobbies on higher education issues for the U.S. Public Interest Research Group, represented students on the now-defunct panel. He said the process was doomed from the start. "There's only so much real reform you can push if the industry that needs to be reformed has a veto," he said.
The department's internal task force has been asked to look at preferred lender lists, in which colleges recommend certain lenders to students; inducements lenders make to colleges to gain preferential status and a federal database that has raised worries that lenders have mined it for financial information about students. The department recently banned lenders from accessing the database.
Spellings said she wants the task force to report back in about a month with recommendations for new federal regulations.
Republicans and Democrats in Congress also are pushing legislative fixes to the kind of problems Cuomo highlighted. Some lawmakers want to write into law a code of conduct that several schools and lenders recently agreed to abide by as part of a settlement with the attorneys general.
The code would ban lenders from paying colleges in exchange for being designated a preferred lender. It also would ban lenders from paying for trips for financial aid officers and other college officials. Lenders also would not be allowed to pay college employees to serve on advisory boards.
"The reforms we are pursuing in Congress, together with the work of the secretary's task force, will provide added help to families paying their college bills, restore trust in our student loan program and make abuses within the system illegal," said Sen. Edward Kennedy (news, bio, voting record), D-Mass., who chairs the Senate education committee.
But California Democratic Rep. George Miller (news, bio, voting record), who chairs the House education committee, said Spellings should do more than form a task force. He has urged her to temporarily ban the use of preferred lender lists. He isn't alone in questioning how much the task force will accomplish.
Jon Oberg, a former Education Department researcher who uncovered a scheme in which lenders improperly sought an artificially high rate of return on loans, said the department's oversight of the industry has been weak.
"I'm happy that the attorney general of New York and now others are exercising some oversight," Oberg said. "Actually the problem should have been addressed much earlier by Congress and the department, because these problems have been known for some time."
The department has had its own problems with the loan system. A senior department student aid official, Matteo Fontana, has been placed on leave pending an investigation into his holding of at least $100,000 in stock in Education Lending Group, the former parent company of Student Loan Xpress — a company Cuomo is investigating.
The Wall Street Journal reported Tuesday that a second student aid official in the department, Michael Sutphin, reported holding more than $50,000 in stock in student-loan giant Sallie Mae. According to disclosure forms, he held the shares until the spring of 2004.
Under department guidelines, ownership in stock valued at more than $15,000 prevents an employee from working on issues related to that company. A note in Sutphin's file initially disqualified him from working on issues related to his Sallie Mae holdings. Subsequent reports showed he continued to own some shares, though under the $15,000 threshold.
Education Department spokeswoman Katherine McLane said Tuesday she knew of no wrongdoing in Sutphin's case. "There's a process. He complied with it. Our ethics office complied with it," she said.

Source - http://www.newsday.com/news/nationworld/nation/wire/sns-ap-student-loan-probe,0,4384562.story