#20
Tue, December 10, 2002
To the editors of Rip-Off Report. Please rearrange the original title of my report so that it will be included in the group of filings against AmeriTrain as well as Sallie Mae.
Thanks,
Marshall
Ryan
Zephyrhills,#3Consumer Comment
Tue, December 10, 2002
Several banks and state guarantee agencies -- which shall remain nameless -- got in trouble with Congress for a similar set up like this one in the early 90s and almost brought down the whole Family Federal Education Loan Program (then known as the Guranteed Student Loan Program); which is why federally guaranteed student loans are so heavily regulated now. Many upstart "for-profit" schools would recommend certain banks to students when they applied for guaranteed student loans and, in turn, the bank(s) recommended by the school would front the loan money to the school. The banks and the state agencies would then give school administrators kick backs for remembering them when students came to borrow. Of course, the loans were guaranteed by the federal government; i.e., taxpayer money. The schools would, without warning, suddenly fold and, of course, the banks and the guarantee agencies would make their claims on the loans to get paid; i.e., again, taxpayer money. It turned out most of these schools were merely fronts to further the banks' and guarantee agencies' scheme to defraud the guaranteed student loan program. Among other methods the guarantee agencies used is to allow, and even encourage, borrowers to default on their student loans that were in repayment so that they could make a claim to the federal goverment on the loan. As if nearly cleaning out the guaranteed student loan program wasn't enough, the guarantee agencies would then continue to hound students that they encouraged to default for payment. Incidentally, even in spite of the fact that Congress knew of the kinds of games the banks and state guarantee agencies played with student loans, not too long after this scandal, Congress still tightened up the Bankruptcy Code's provisions regarding the discharge of federally insured student loans (now it's nearly impossible to have them discharged). Congress' rationale for this was that recently-graduated students were abusing bankruptcy by filing right after graduation so that they would not have to pay their loans back and this, in turn, had a deleterious effect on taxpayers because they fund the program. Nevermind that most people try to avoid bankruptcy at nearly any cost because of the devistating effect it will have on their credit for 10 years, that Congress had no evidence of student loan borrowers abusing bankruptcy and that the banks and state agencies were the ones that almost destroyed the student loan program through their own greed. The student loan business has to be one of the most blantant legalized rackets going.