The Next Financial Balloon to Burst: Student Loans

ore than $221 billion of these loans at the largest banks will hit this mark over the next four years.

According to the The Huffington Post:

 Sallie Mae, the nation’s largest servicer of federal student loans, is failing to enroll many of its distressed borrowers into one of the Obama administration’s main initiatives for alleviating high student debt.

Officials have cautioned that the government figures cited by HuffPost are just rough estimates, but so far, they are the only available indicator of how Sallie Mae utilizes the loan relief program.

Think about the information you are giving this stranger: all your financial information, your children’s names, bank accounts and your social security number. You do this without the slightest guarantee that the information will be kept safe.

Documents obtained by The Huffington Post and estimates provided by the White House separately suggest that Sallie Mae, or SLM Corp., has enrolled relatively few borrowers into the Income-Based Repayment program. Sallie Mae dominates the now-discontinued Federal Family Education Loan Program, owning between 37 and 40 percent of the outstanding FFELP debt held by the private sector. But its share of FFELP borrowers who are enrolled in IBR (Income Based Repayment programs) is about half that, or 15 to 18 percent.

Outstanding federal student debt has nearly doubled since 2007 to $1 trillion, government data show, while the average borrower with federal student loans now carries more than $26,000 in debt — a 42.7 percent increase since 2007. The IBR program has emerged as President Barack Obama’s signature tool to address this burgeoning crisis.

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Sallie Mae is in the news again, this time for lagging in supporting and implementing IBR (Income Based Repayment). Sallie Mae’s failure is no surprise to me or those representing borrowers/guarantors. I don’t want to get on my high horse here – but the abuses of the borrowers are outrageous. Sallie Mae is paid to assist student loan borrowers, so perhaps it is time to revoke Sallie Mae’s contract so as to make room for an entity that will comply with regulations.   Supposedly Sallie has a net worth of over 937 million dollars.  So why are they ignoring their responsibilities?

Don’t misunderstand me, I am all for people paying back their student loans. There is a waterfall effect if someone does not repay their loan then there are no funds for the next person and the next person.  But, there must be consideration as to the amount of money loaned and the need for educating the borrower and guarantor.