The Evils of Predatory Lending in Student Loans

The increasing rates of tuition have been to blame for deterring young people from living their dream of attending college. This is not the only deterrent; it is also the rising cost of paying back student loans. Most students are not lucky enough to be born into wealth, which will pay for four years of college. Most of us struggle to pay our way through school with the hope that eventually we will make enough to pay the loans back. For some of us this reality never happens.

One of the reasons that some of these students feel so overwhelmed is due to the students defaulting on the loans. Once a person defaults on their student loans, this can send their financial woes into a tailspin of destruction. If the defaulted loans are turned over to a collection agency, the interest on the loans can be increased up to 29% in some cases. At this rate you will be paying double or possibly triple for the original loan amount. You will be in debt for the rest of your life at that rate. There are ways to get out of default, if you begin paying the loan again; usually after 9 to 12 monthly payments made on time will reset the loan to a good status. This depends on your loan provider, and their regulations.

As most people know, you cannot run from your student loans, they cannot be discharged in bankruptcy unless you fall into strict and almost impossible criteria, and they certainly will not disappear after seven years time. The people in charge of these loans will track you down to the ends of the earth, garnish your wages and make your life a living hell if you do not pay. The only way out for some people really is death.

When I talk about death as an option out, I mean it. The suicide rate has increased over the past decade as predatory lending continues to seek new victims. It is a sad reality that some students who borrow far more than they can afford to repay, are now viewing suicide as a way out. I recently came across some articles while doing research, discussing the devastation caused by these young students who couldn't't accept their financial slavery to their student loans. In the end the pressure was too great, and they took their own lives to avoid being in debt for the rest of their lives. The underlying cause has been identified as, predatory lending. Many of these students are facing loan repayments that will place them into financial debt for the majority of their adult lives.

Worse yet, people are profiting from those who fall into default status. This is unbelievably huge money. The Department of Education also makes a profit for each of the defaulted loans. These companies are making billions of dollars a year at the student's expense. There are many numbers but apparently the student loan industry has raked in about $85 billion dollars, and that is just for this last year.

Unfortunately most of us do not read the disclosures or the fine print well enough to figure out that we too could be subject to predatory lending practices. It's the fees and penalties that can really ruin you. Not to mention the interest rates that may increase over time. That is why as a student you must know what you are getting yourself into. Shop around and find fixed rates if at all possible. In visiting a site called www.Studentloanjustice.org some of the student's claim that they started out with a set amount of say $30,000 and missed a single payment, and now they owe $60,000 or more due to penalties and interest. I understand that there must be consequences for missing a payment but in some cases these loans accrue interest at an astounding rate placing the student in financial ruin.

It is also frustrating that many times the lenders of these loans will not allow you to refinance your loans while you are in school. Instead they will tell you that you must wait until you are no longer in school to refinance. This is of course so they can collect more interest from you in the mean time. It is really no wonder why students are drowning alive in debt. The worst part of this is that many of the students do not make enough money from their jobs to pay the monthly payments on the loans. In some cases, the borrowers must make huge changes to their lifestyle such as moving back home with family to make their loan payments. The whole point of going to college and educating yourself is supposed to be about bettering yourself and making more money for your future.

There are few people with authority who recognize that this is a problem. If we keep going the way we are now, the student loan market is surely going to crash just as the housing market did. As students enter college they may not anticipate the stranglehold that the loan providers will put onto them. This is why it is critical to research your options and pay for as much of your schooling on your own as possible. It is also crucial to understand what you are getting yourself into, do not borrow just to borrow. You will be responsible for repaying the debt at a high price if you are not cautious.