Once again, lenders are suing consumers without verification and knowledge of the fundamentals, like who owes how much and to whom. Residential mortgage market crisis, round 2.
Since 2007, the federal student loan balance has more than doubled, to almost $1.2 trillion from $516 billion. That figure doesn’t include the $150 billion in loans from banks and other private lenders. Just like with mortgages, the loans have been securitized in to pools, with the same sloppy record keeping. The National Collegiate Student Loan Trusts are investment vehicles created by a Boston company called First Marblehead. First Marblehead bought up student loans from banks, and transferred batches of loans to more than 25 trusts it also created. The trusts then sold bonds backed by the loans. Moody’s said in a 2013 report that it expected losses in some of the trusts to reach as high as 50% losses.
The CFPB (Consumer Financial Protection Bureau) has now launched a “public inquiry” into “student loan servicing practices.” “Student debt stress can make borrowers feel like they are walking a tightrope where any false move in paying back a loan can cause them to fall,” said CFPB Director Richard Cordray in launching the inquiry.
Please take action to send in your comments — they are being accepted through July 13, 2015 at the CFPB. The taxpayers should not bail out stupidity and greed yet again, and our young people need some help. If you are sued for a student loan that seems incorrect, file your papers, show up in court and fight it.