volinbham
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Food for thought
The Largest Predatory Lender in America | The Weekly Standard
The Largest Predatory Lender in America | The Weekly Standard
What would you think of a lender that has holds more than one $1 trillion in loans outstanding, targets low income and minority borrowers, has a payment delinquency and default rate in excess of 25 percent, and has postponed repayment on 14 percent of its loans, but is still accruing interest on them? Wouldn't you think that some government agencysay, the Consumer Financial Protection Bureau, the Federal Reserve, or even Congresswould be investigating this perfect definition of a predatory lender and trying to shut it down?
The Consumer Financial Protection Bureau, always quick to chase down payday and sub-prime mortgage lenders, says that if a lender does not, " verify customers' income and confirm that they can afford to repay the money they borrow," they are a predatory lender. So how does the government verify a 17 year old's income right out of high school and confirm that four to six years later whenactually, ifthey graduate from college they can afford to pay back their student debt? Clearly with more than a quarter of all student loans in default, the Department of Education isn't following the bureau's guideline and by their own definition is a predatory lender.
The PLUS program is the single most profitable loan program of the more than 120 ways the government lends. It's even more profitable than SBA loans and Treasury Department advances to the Federal Reserve. Currently, the program makes loans at a 7 percent interest rate with a 4 percent origination fee. This is almost double the rate charged on loans made directly to students, and those are made without any origination fee. Parents of college students would be better off taking a second mortgage on their home than borrowing under this program. Additionally, direct loans don't begin to accrue interest until the student leaves school whereas with Parent PLUS the interest rate clock begins ticking day one. The White House Budget Office says that even after defaults and bad debts, they expect to collect $1.23 for every $1.00 they lend with Parent PLUS. That's an astonishingly profitable program.