Private Student Loan Providers Draw Fire

Student groups oppose use of bailout funds for unregulated lenders
By Kevin Spak,  Newser Staff
Posted Nov 28, 2008 3:20 PM CST
Private Student Loan Providers Draw Fire
Private student lenders are often predatory and have insufficient consumer protections, student advocates say.   (Shutterstock)

Private student lenders deserve no part of the Treasury’s $200 billion consumer lending program, student advocacy groups say. They charge that the largely unregulated industry preys on young borrowers with risky variable-interest loans, the Washington Post reports. “A bailout for the providers of usurious private student loans will not solve the college affordability crisis,” said the heads of nine groups, including the publishers of Consumer Reports, in a letter to Hank Paulson.

If the Treasury does decide to rescue the private lenders, it would be “unconscionable” not to enforce better consumer protections as part of the deal, the groups say. They have the backing of congressional Democrats who say they haven't been briefed on the details of the bailout plan. "My concern here is that what Paulson may be doing is borrowing the good name of student loans to bail out some very bad actors," said Rep. George Miller.
(More student loans stories.)

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