A majority of more than 800 bankruptcy lawyers in a survey say they have seen an increase in clients with student loans over the past few years and that most of those debtors are unlikely to be able to discharge their loans due to "undue hardship." The survey, published by the National Association of Consumer Bankruptcy Attorneys, found that 62 percent of the lawyers have seen bankruptcy cases involving student loans increase at least 25 percent since 2008. A paper published with the survey warns of a "Student Loan ‘Debt Bomb,' " and calls for restoring the ability to discharge student loans in bankruptcy.
Nearly half of the for-profit colleges in California are being kicked out of a state student aid program because of their default rates, The San Francisco Chronicle reported. Under a California law, those with three-year loan default rates of 24.6 percent or higher are barred from having their students receive Cal Grants. About 4,900 Cal Grant recipients were enrolled at this colleges when the law took effect in the fall. Those who had been previously enrolled were allowed a partial grant.
Protests against Sallie Mae's $50 "forbearance fees," which the lender charges to borrowers who cannot pay their loans and opt to let the funds accumulate interest, unpaid, rather than defaulting, have spread to Facebook. Thursday, Sallie Mae changed its policy after a petition to end the fees gained more than 75,000 signatures: after the borrowers have begun repaying the loan, the $50 fee will be applied against the loan's balance rather than pocketed by the company.
But that wasn't enough for many who wanted to see the fees vanish entirely, and many commented on the Facebook page for Sallie Mae's Upromise accounts asking that the policy be changed. The company later removed the Facebook posts, according to before and after screenshots. The "before" screenshot was provided by Change.org, the website where the petition started. (By Monday evening, more commentshad appeared. Sallie Mae representatives did not respond to a request for comment from Inside Higher Ed.)
Sallie Mae said Thursday that it will still charge a quarterly $50 fee to student loan borrowers in forbearance, but that the charges will be applied to the borrowers' accounts once they "resume a track record of on-time payments," a spokeswoman said. The lender charges the fee when private student loans have gone into forbearance, continuing to accumulate capitalized interest although borrowers do not have to make payments. An online petition criticizing the fee as an "unemployment tax" had accumulated 77,000 signatures as of Thursday, building pressure on Sallie Mae to alter its policy.
In an e-mail message, Martha Holler, senior vice president for corporate marketing and communications, said that after "giving it careful consideration for some time," Sallie Mae will apply the "good-faith payment to the customers’ balance after they resume a track record of on-time payments," retroactive to forbearances granted as of Jan. 1. The former student who started the petition, Stef Gray, said in a statement of her own that the change did not go far enough. "At the end of the day, Sallie Mae is still asking unemployed college grads to fork over money they don’t have," she said. "Sallie Mae needs to drop this unfair fee for good.”
A petition asking Sallie Mae to revoke the $50 quarterly "forbearance fee" that the lender imposes on borrowers who are unable to repay their student loans has gathered more than 75,000 signatures. Forbearance, when loans continue to accumulate capitalized interest although borrowers do not have to make payments, is the last resort to avoid default, and the petition protests the $50 fee as an "unemployment tax."
"As an unemployed person desperately looking for work, I need every extra dollar I have to pay for rent, electricity and groceries," wrote Stef Gray on the petition. "But Sallie Mae is preying on people like me and cashing in on the fact that we need more time to find work before we can repay our student loans."
Such fees are not uncommon on private loans, and Sallie Mae has defended them as a way to ensure that the borrower is committed to continuing to pay.
Class-action lawsuits have been filed against 12 more law schools over employment data, with 51 of their graduates accusing the schools of misrepresenting how many graduates would be able to find high-paying law jobs after earning a degree. The 12 schools -- Brooklyn Law School, California Western School of Law, Southwestern Law School, IIT Chicago-Kent College of Law, John Marshall Law School, Florida Coastal School of Law, and the law schools at DePaul University, Golden Gate University, Hofstra University, Union University, the University of San Francisco and Widener University -- join three that have already been sued in a similar class action.