Costly Private Loans Masquerade As Federal Student Loans

Some students who didn’t read the fine print are finding out too late that what they thought were federal student loans were actually private loans. The mistake is the difference between a 6% and 18% interest rate.


Hickey knew she would need loans to complete her degree, so she went to the campus financial aid office as a freshman. After she filled out paperwork, Brooks Institute set her up in a loan program administered by Sallie Mae, the nation’s biggest student lender. Sallie Mae was chartered by the federal government in 1972, and most of its business is in issuing federally insured student loans. But while it may appear to be a quasi-government agency, it is in fact a for-profit company whose stock trades on the New York Stock Exchange. Hickey ended up with $20,000 in low-interest federally guaranteed loans issued by Sallie Mae, and $120,000 in higher-interest private loans issued by Sallie Mae.

Has this happened to you? Leave your thoughts, and monthly payments, in the comments.

Student loans turn into crushing burden for unwary borrowers [LAT]


Edit Your Comment

  1. burnedout says:

    The the federal interest rate really 6%?!? Geez, I got a federal consolidation loan in 2005 and am paying 2.8%. Thank goodness I did that…

    I teach at a university now, and I haven’t stumbled on this, and haven’t had any students mention it either. But, our university doesn’t accept funds from private lenders, so unless these are lenders who are cutting checks directly to the students, I doubt it will be an issue here.

    • Esquire99 says:

      The Federal Interest rate is actually 6.8% right now.

      • Thaddeus says:

        @Esquire99: For 2009-2010: Graduate Students loans (Stafford) are 6.8% sub or unsub. Undergrads have a 5.6% Sub and a 6.8% unsub. repayment begins 6 months after you graduate or 6 months of nonattendance (summers so not couut, so don’t freak out). Perkins loans are still 5% and start repayment after 9 months.

        Shame on the Financial Aid office that did NOT explain that it was an alternative loan…

    • theblackdog says:

      @burnedout: Yeah, they were sending notices out to folks who had loans in 2005 to consolidate now because rates were going to go up by the next month. I was one of the lucky ones who consolidated before the deadline and locked in 2.8% as well :-D

    • Megan Squier says:

      @burnedout: Yeah, I’ve got 2. something on my federal loans and 6.5% on a private Sallie Mae loan. My husband graduated last year and has similar rates on his federal and private loans. Is that because our credit is pretty good or have things changed radically in the past few years?

  2. Shappie says:

    Does anybody do Loan refinancing nowadays?

    I have $25k in loans with an 8% rate. I would love to get that down even a little bit but the way things are going, nobody is offering them now.

  3. Esquire99 says:

    This is why it’s very important to read your paperwork and ASK QUESTIONS when you’re taking out a loan. I blame poor parenting and poor financial education for creating a society of people who don’t read what they’re signing and who think it’s more important to not hold up the line/process/person waiting for the form than to ensure proper understanding.

    • Skaperen says:

      @Esquire99: So there onus of responsibility is only on people, and not at all on any business or corporation?

      • Prole says:

        @Skaperen: I’ve got to agree with Skaperen’s point which is that a corporation should have some responsibility to educate their customers.

        Like many people, I got have a private student loan that I got in college. It’s so easy to target the fresh faced college kids who have just emerged from High School. I had a niave point of view in those days and I am sure I was easy pickings for what turned out to be a predatory high interest student loan.

        Its unrealistic to think that many, or any, college freshman would have the working knowledge of finance and the jaded cyncism necessary to approach these companies.

        • DollaValueLIFO says:



          The job of the lender is to generate profit by lending sums of money to individuals that will pay it back with interes. The responsibility of the lender is to the Board, the shareholders, and the bottom line.


          • DollaValueLIFO says:


            I am as pro-consumer as anyone, but I hate hate hate it when people think that some profit generating enterprise has any responsibility to the consumer.

            • johnva says:

              @DollaValueLIFO: You don’t think companies should have ANY social responsibility beyond making money and following the letter of the law? Wow.

              I might be a LITTLE more sympathetic to this position if I thought the laws regulating these entities were actually written to protect consumers and give them a voice, but instead they are often written by lobbyists for major corporations. So in effect, they get to write the rules and then don’t have any responsibility except for following the “rules” they wrote themselves?

              Profit-making enterprises absolutely do have a responsibility to behave responsibly, in my opinion. They aren’t exempt from morality just because their purpose is to make money. Amoral behavior is to be EXPECTED from these companies, and practically there may not be much we can do about it, but it’s still wrong. I don’t understand your “hate hate hate” attitude of actually attacking people who think they have more responsibility than just the bottom line.

              • Prole says:

                @johnva: I agree. I work in finance and I strongly believe that I have a responsibility to educate my customers so they know what they are purchasing. Although I don’t deal in debt products, it still is much the same in the respect that the customer should know what is expected of them.

                I also think that reading a dense contract of complex sentences and legal jargon should not be the primary method by which the important information is conveyed.

      • Esquire99 says:

        The legal responsibility, yes. I think that companies should make sure their customers are informed, but I strongly resist any legal obligation that they do so. If they don’t want to take the time to point out and explain all of a customers options without being prompted, they shouldn’t have to. The onus is on the customer to ask any pertinent questions, and then the responsibility shifts to the company to properly answer the question. They shouldn’t have an affirmative duty to make sure people know all that the company thinks they need to.

      • Squeezer99 says:

        @Skaperen: that’s correct.

    • sponica says:

      @Esquire99: financial aid departments are NOTORIOUS for not telling you information that you could know to save yourself money…it’s why I borrowed from sallie mae my 1st year of grad school, i didn’t know the school was a direct loan school and I could have gotten a loan with a lower interest rate. Yes I’ll read what I sign, but it would be appreciated if you gave me the information on ALL my options.

      AND there were some very illegal profit sharing agreements b/w schools and some lenders a while back.

      • Esquire99 says:

        I think the school has a “moral” obligation to tell you, but nothing more. It’s pretty crappy that they don’t, but there should be no legal requirement that they baby you. If you don’t ask questions, that’s your fault. If you don’t ask, “Is this my only option?,” that’s on you. People need to learn look out for themselves and not expect others to hold their hands and guide them (save for their parents).

        • Prole says:

          @Esquire99: That’s unrealistic! Not everybody comes out of High School with an instant distrust of the world. These are basically kids! Legally adults, but still children for all of that. Financial wisdom comes with time. It stands to reason that there should be some institutions that a college kid should be able to trust. A student financial aid office at a university certainly seems like it * should * be one of those.

          • subtlefrog says:

            Exactly. No matter whether the school is private (“for profit”) or public, someone at that school should be the advocate for the kid coming in who doesn’t have the experience and understanding to deal with these things. A lot of the kids don’t have parents involved at all, or if they do, their parents may be in no position to help them make any sense of the mumbo jumbo that is the contract. As was stated above – it’s not about good parenting, and it’s not really even about good education in this sense (though I’ve certainly lamented our failing education in other posts). A kid coming out of high school simply doesn’t have the world experience, in most cases, to understand that when a contract is handed to him or her to sign for a loan that maybe s/he should ask – Are there any other options I should know about? Am I going to be in debt for the rest of my life? Will I be able to pay this off? Most of these kids go in so wide-eyed that they think that if someone is handing them the contract, then it must be in their best interest to sign.

            If their parents never went to college – how will mom or dad help them to understand whether or not this is a good idea? Maybe they’ll have a sense of yes or no – maybe not.

            That financial aid office should be there to help kids like this.

        • mac-phisto says:

          @Esquire99: great. & if a lender let’s someone borrow money that they can’t afford to repay, they get to eat the loss, right?

          do you honestly think it’s just to allow companies to strap 18-year old kids with $100k+ in debt that they can never get out from under? to me, that not only seems unjust, but also incredibly unwise.

          • Esquire99 says:

            If the 18 year old wants to take it on, and the lender is willing to make the loan (taking risk and ability to repay into account), then yes. I have no problem with people being forced to repay debt that they voluntarily take on, even if it takes them their entire lifetime to pay back. That’s part of the reason that I’m generally against personal bankruptcy.

            • Jeremy82465 says:

              Lemme preface what I am about to say. I got my student loan when I was 17, from Sallie Mae, and some of them are higher interest than I would like, but I pay them on time every month, with a little extra when I can afford.

              That being said, I see you Esquire, post a lot on these contract related stories often on the side of “well you should of read it, your fault” and I can see how on this one you are kind of stand offish a bit due to age and circumstance. Normally I disagree just on the basis that I dont believe contracts should be this complicated in the first place, but one thing I can say is you are always very civil and well spoken, and I have a whole new appreciation for you after reading Bigfoots comment a little ways down. While I may disagree with you, I am glad you are level headed and firm in your stance.

            • mac-phisto says:

              @Esquire99: see, this is where i take issue though. the lender doesn’t have to take risk & ability to repay into account like most traditional lending contracts BECAUSE their contract is protected. pretty much the only way to get out from under these loans is death or a debilitating disease.

              do you not see the potential for abuse here?

              • Esquire99 says:

                While there probably is potential for abuse, it’s on the borrow to protect themselves. If they don’t understand what they are getting themselves into, they should stop, step back and re-assess. For some people, an investment in a college education will repay itself many, many times over. For other, it’s not such a good deal. College isn’t for everyone (though it’s frequently pitched that way). People need parents, friends, mentors, guidance counselors, etc. to help them decide if college is for them and to help decide how to pay for it (and what repayment entails). The lender shouldn’t be expected to hold the borrowers hand and look out for them. The lender should be interested in one thing: their bottom line.

                • mac-phisto says:

                  @Esquire99: i agree with you on all those points. however, if the government is going to protect the lender’s interest, then they have a responsibility to protect the borrower’s interest as well. hence, if lenders want non-dischargeable loans, they should have to agree to a marketplace that’s fair to the consumer (meaning no funny business).

          • Trai_Dep says:

            @mac-phisto: These for-profit schools should be on a separate, private financing track than traditional schools, I think. It’d make sense because these “school’s” graduation rates, default rates and associated quasi-legal scams are much higher than traditional schools.
            It’d be less confusing for unsophisticated eighteen-year-olds while clearing the runway for accredited, traditional schools.

    • Prole says:

      @Esquire99: BTW, knowledge of finance and the loan industry, while valuable, is not a good indicator for quality of parenting.

      I agree about the education system though. I wish that High School civics was more comprehensive. Wish in one hand…, eh?

    • mac-phisto says:

      @Esquire99: ok, i agree with that, but only up to the point that STUDENT LOANS ARE NOT DISCHARGEABLE! if the government is going to protect the industry, then the industry has a responsibility to adhere to a set of guidelines that shield the consumer from abuse. & part of that is a responsibility by the lender to ensure that borrowers know what they’re signing on for.

    • qwickone says:

      @Esquire99: This exact thing happened to me. I thought Sallie Mae only did federal loans and I was trying to take responsibility of my educations, so I didn’t have my parents review the docs. I actually did read them all, but I was 18 at the time and I didnt really understand what I was reading. It was only after I graduated that I realized it was a private loan. I accept my responsibility and luckily I only took out $15K, so I’m not in bad shape, but the paperwork is really not clear.

  4. dr1024 says:

    Since they are not federally guaranteed loans, I think you can (as a possible up side, if you can call it that) go bankrupt on the loan if you need to. Whereas you can’t on federally guaranteed loans.

    • sponica says:

      @dr1024: unless she had any credit whatsoever, she would have needed a cosigner on the first private loan. and if I declare bankruptcy my nana gets hunted down for the 10k loan she cosigned on

      • Prole says:

        @sponica: Yeah, my dad is on the hook if I default. It just feeds my burning hatred for these companies.

        I remember when I called them after graduating and listened as a rep explained that this is designed as a 30 year loan. I’m making large payments so it’s going faster than that, but seriously, a 30 year loan designed for a college freshman?

        • sponica says:

          @Prole: mine are 10 year loans…. but I know back when they offered private loan consolidation, the repayment could stretch as much as 30 yrs. because i totally want to be paying my loans off when my theoretical kids are in college…

          • Prole says:

            @sponica: Heh, yeah, I was signed in to 30 year repayment right off the rip. If I could do it over, I would have done it much differently.

        • DollaValueLIFO says:


          30 years is acceptable for a mortgage, why not for a University education? Your degree is likely worth more to you than the house you would be able to buy (in terms of generating income, not as a place to live, duh).

          Also, as a person who currently pays Sallie Mae, you have the option of choosing shorter pay-back periods (or at least you did, when I consolidated my UG loans in 06). My graduate loans are Direct Loans, so they’re at 6.8% for the forseeable future.

          • johnva says:

            @DollaValueLIFO: One big difference is that a house is a tangible thing that they can seize if you don’t pay your mortgage. An education is not. But it can still lose its value rather easily. So you can end up “under water” on your student loans just like with a mortgage.

            Also, it’s you that’s trying to argue that student loans are “different”, not us. You can get rid of a mortgage in foreclosure/bankruptcy, but you can’t get rid of a student loan.

            • DollaValueLIFO says:


              I feel like you might’ve contradicted yourself wrt the whole house v education thing, you just mentioned that the lender can take your house, while Sallie Mae cannot take your degree. The value of the degree is there, regardless of your credit score.

              Besides, when a house is forclosed upon, the loan can be forgiven or crammed down in court. The asset has been taken, the loan is no longer tied to anything owned by the lendee, so it makes sense to work that out. Give SM an incentive to loan if the debt can be removed from the books, but the thing it helped buy is still around (the degree).

    • Joseph Fisher says:

      @dr1024: No, sadly private student loans are just as non-bankruptable as federal student loans.

      Which is pretty screwed up if you ask me.

      • sponica says:

        @Joseph Fisher: eh i can see why they are non-dischargeable…why should sallie mae or any other company have to foot your bill for college because it didn’t work out?

        but from what my mother tells me we have med students to blame, they’d graduate, declare bankruptcy with their high enough salaries to live a decent life and pay cash for everything, so it didn’t matter their credit was in the dumps….

        • jeteplumererie says:

          @sponica: I would say your mother is wrong on that one.

        • Joseph Fisher says:

          @sponica: Take the logic one step further and you’re advocating outlawing bankruptcy altogether. I mean after all, if someone gets in over their heads in CC debt, which is arguably a lot worse for society than someone getting an education, they can go bankrupt.

          Bankruptcy serves a very useful purpose. It should be rare, but still an option. The thing that really irks me about student loans being non-discharable is that it was originally done to protect the federal government. Government issued education loans are VERY different than private ones. The interest rates often double (or more) for private loans over public ones, and the terms are much much less flexible. And frankly, I don’t like the idea that any private company can give out a loan that can NEVER be forgiven. It’s arguable how much the government should be allowed to do this, but NEVER private industry. That is giving the private companies WAAAY too much leverage over consumers.

          • johnva says:

            @Joseph Fisher: I agree completely. Any private loan should be dischargable in bankruptcy. That’s just bullshiat that they aren’t. The purpose of the loan should be irrelevant. Bankruptcy should ONLY consider, in my opinion, your potential ability to repay the loan. And, granted, people who have graduated from college probably do have more ability to repay, so they shouldn’t get loans as easily discharged. But I definitely there are circumstances under which it should be possible (e.g., permanent disability, etc), and that’s what bankruptcy should be for anyway.

            What really bothers me about a lot of these stories is that the people who took out these loans may have been 17-18 at the time. Yes, people should read their contracts and such, but the contracts are purposefully opaque and deceptive. And someone who is 18 may not yet have the sophistication to detect the scam. It’s not fair, in my opinion, for society to allow private companies to prey on people like this literally months after they legally able to sign that contract. People should be responsible for their own choices, but we need to recognize that the reality is that not everyone fully understands that decision at that age. I think the balance that should be struck is that YES, people are responsible for paying back their loans, but that there are certain lending practices that are illegal.

          • mac-phisto says:

            @Joseph Fisher: i understand the point – college loans are fairly risky & do not provide an immediate return (most don’t start payback until after graduation). the reason for making them non-dishcargeable was to increase the availability of loans (& theoretically, make it more affordable for more people to go to college).

            i don’t have a problem with the LOANS being non-dischargeable, but these companies also have their interest & fees protected & there’s nothing that limits these to reasonable levels. that, imo, is the real problem. if i default on a student loan, my balance can DOUBLE once back interest, collection fees & other garbage fees are added. & i’m on the hook for every penny.

            i’d like to see the laws rewritten so that only principle is protected & perhaps a nominal interest rate, as well as the ability for a bankruptcy judge to modify the terms of the loan for payback. that would at least create an outlet for those that have no hope of ever escaping.

            • johnva says:

              @mac-phisto: That’s a good idea, for a start. Although I don’t think I agree that the principle should be protected under ALL circumstances. Discouraged, yes. Student loans favored by courts over say, credit card debt? Yes. But banning the courts from intervening under ANY circumstances? I don’t agree with that.

              To your first point – I think you could probably make the argument that increasing the availability of private student loans might have actually made college MORE expensive and unaffordable, in the long run, for more people. The easy availability of these loans probably made colleges raise tuition a lot more than they would have otherwise, because they knew that they could and people would just get student loans to pay for it instead of just not going (and they did, as college tuition has been increasing far beyond the rate of inflation for years). If we want to make college more affordable for people who couldn’t go, period, otherwise, we should expand grant programs rather than allow private lenders to make more predatory loans.

              • mac-phisto says:


                To your first point – I think you could probably make the argument that increasing the availability of private student loans might have actually made college MORE expensive and unaffordable, in the long run, for more people.

                oh, definitely. & ditto for the federal loans. check out the tuiton history for in-state students at my state university from the year i started to today:

                year – tuition (per academic year) – % increase
                1998 – $5,632
                1999 – $5,840 – 3.7%
                2000 – $6,162 – 5.5%
                2001 – $6,543 – 6.2%
                2002 – $7,054 – 7.8%
                2003 – $8,008 – 13.5%
                2004 – $9,296 – 8.1%
                2005 – $10,048 – 8.1%
                2006 – $11,024 – 9.7%
                2007 – $11,646 – 5.6%
                2008 – $12,284 – 5.5%

                absolutely ridiculous.

                this is really a tough nut to crack. you advocate more grant programs in your post, but that can cause issues as well, specifically b/c only the most disadvantaged qualify for grants. what results is a model where the lower class can get grants for school & the upper class can afford to pay for school, but those of us in the middle get squeezed.

                i wish i had an answer, but i don’t. that’s actually why i enjoy discussing this topic so much b/c i haven’t formulated a static opinion on what should be done. my ideas have morphed considerably over the years (i used to believe in free access for all or 100% federal funding of tuition – not so much now). what i do know is this: we need to revise the way colleges/universities are managed before education will ever be “affordable” again – for example, i think unrelated business income should be taxed unless that income goes directly back into education. we also need to take a fresh look at endowments. but fixing these issues in the lending department are definitely a big part of the picture.

            • DollaValueLIFO says:


              Again, mac-phisto, the voice of reason!

              Private lenders need to be able to collect on the loans with some reasonable degree in order to continue lending.

              That said, allowing a court to protect the principal and cram down the rate is the fairest method. That way both parties live up to the intent of the contract.

          • DollaValueLIFO says:

            @Joseph Fisher:

            Wait, what? If Sallie Mae lends you $115,000 cash over a four year period, we’re not talking Space Dollars or theoretical cash. It’s real checks that are being paid. They’ve made those loans with the backing of the Feds, yes, but the cash is still out there, and you owe it. You needed it. You wanted it, otherwise you would have sucked it up, went the cash only route and worked your hind parts off for 4 -6 years to graduate with no loan debt.

            Why in the world should a company have to write these loans down because you are bankrupt? I read an article somewhere that stated that over 25% of student loans are in deferrement for some reason or another. The money to lend just doesn’t pop up from the ground.

            • johnva says:

              @DollaValueLIFO: Again, all the arguments you are making would apply to any debt, not just student loans debt. Are you saying that NO bankruptcy should be allowed, at all? For ANY debt?

              I’m not arguing that people should be able to just get out of their student loan obligations if they can pay them. I just think that courts should be allowed to restructure them under some exceptional circumstances. That’s what bankruptcy is for. No one thinks it’s a good thing, but it’s necessary because the alternatives are far worse.

              Also, like I said, I don’t think it’s good public policy for us to allow private lenders to have these kind of powers over people just because we want more private lenders to make student loans. It probably increases tuition indirectly (making more people require the loans!) and it gives private companies powers that only the government should have. If college is too expensive for too many people, we should figure out how to bring down the cost of college, not just make it easier for people to get loan-shark-like private student loans that can never be discharged in bankruptcy.

              • DollaValueLIFO says:


                Tuition increases are something I know all about, I graduated from UMCP! State schools arbitrarily raise their fees and cost per credit hours without much to show.

                Private lenders only have the power in this instance because of the nature of the debt agreement. If I buy nothing but 42 inch plasmas on my AmEx and then file bankruptcy, the court will order me to sell the tvs and pay a reasonable percentage to the debt collector.

                What is the recourse for the lenders in these discharged student loans?

        • DollaValueLIFO says:


          True enough. My sister-in-law is a nice person, but doesn’t get the whole money thing. She took out near $115,000 worth of SL to pay for two (BA + MA) degrees in the SAME MAJOR, racked up her credit cards, and is considering filing for bankruptcy.

          All I hear from her is how she’s “screwed” by her studen loans and they should discharge them, blah blah…

          She makes a good salary ($65,000 for her concentration is on the higher end, seeing as she hasn’t tried looking outside her quasi-federal employer).

      • DollaValueLIFO says:

        @Joseph Fisher:

        Why? Based solely on the fact that we’re talking about “students”?

        I’m no free-market slog but the moral hazard in allowing student loan debt to become dischargable under Chap 11 means big problems.

        • johnva says:

          @DollaValueLIFO: The same “moral hazard” applies to ALL bankruptcy. It doesn’t mean we shouldn’t have bankruptcy. I don’t see how this is any different with private student loans than it is for any other sort of private debt. Why are they “special” with regards to bankruptcy when nothing else is?

          • DollaValueLIFO says:


            Bankruptcy is a vital piece of the financial puzzle, but the sheer size of the loans is what scares me away from advocating for their complete dismissal.

            • johnva says:

              @DollaValueLIFO: I’m not advocating for their complete dismissal. I’m just saying that judges should be allowed to do that if they feel the circumstances warrant it.

              @DollaValueLIFO: Actually, another way to look at it is that the fact there isn’t seizable collateral means the borrowers need MORE bankruptcy protection, not less, because they don’t have any practical way to give something up and get out from under the debt. That goes both ways: the existence of secured property protects BOTH the borrower and the lender, not just the lender.

              @DollaValueLIFO: The recourse they have is that they could force you to give up other assets during bankruptcy. It’s not like judges would just suddenly treat bankruptcy as a “get out of your student loans free” card.

  5. Eldritch says:

    Haha, A+ Doctor Who picture.

    Also, Sallie Mae can kiss my ass. I’ve had nothing but problems with them. I once paid one of my smaller loans for an entire year, no problem at all, using one of THEIR coupon books, and then I got a letter telling me I had been paying them the wrong amount (short by about $1.25) and was therefor having to pay crazy late fees. I called them up, asked what the HELL, and was told after my first payment they re-did my loan payment numbers and thought I could pay them more each month. They just didn’t tell ME this. And it took them a year to figure it out. Thankfully they waved the fee, admitted fault and I was able to regain some perks I had gotten for paying on time for a year. But still, it was SUCH a crazy run around and about a full week of calling them to fix the issue.

    I won’t even tell you what a pain in the ass it was to get them to change my address when I moved.

    • circusgeek says:


      That happened to my sister with Texas loans (Hinson-Hazelwood is run by the most incompetent people on earth.) They told her one amount to pay and then re-adjusted it without telling her. My parents (who co-signed) got a nasty letter from the state of Texas saying they were being sued because of the loan company’s mistake. It all got worked out thought, thankfully.

  6. BigFoot_Pete says:

    Help me! I signed a contract and I didn’t bother with something as basic as reading or understanding it first! Oh, woe is me! I blame the government, the school, and anybody else that is not me taking responsibility!

    • What The Geek says:

      @BigFoot_Pete: I’m all in favor of personal responsibility and all, but I know a few people who have dealt with Sallie Mae, and from what I gather, they go way out of their way to mislead students about what sort of loan they’re getting.

      They also engage in some dubious debt collection practices. I’ve heard multiple accounts of someone who fell behind on their loans, called Sallie Mae to set up a new payment plan, both parties agreed to said plan, and then S M went behind the debtor’s back and approached their employer to get their paycheck garnished.

      Like I said, I’m all for personal responsibility. Read what you sign, and ask questions if you don’t understand it. None of that should excuse the misleading and shady practices of Sallie Mae. Just as a person should be held accountable for their loans, so too should Sallie Mae be held responsible for their significantly-less-than-honest business practices.

    • katiat325 says:

      @BigFoot_Pete: As bad as it is, I agree. I came from a low income home, so it was extremeley important for me to look over my paperwork and make sure that I knew what I was signing. I only had 2 small loans, one of which is already paid off. I did receive letters from banks, my school’s financial department, and the government about other loans — but reading the agreements and fine print, and finding out that they charged outrageous interest, I knew better. So yes, it’s horrible that SM did this, but the OP is partly to blame to ignore the fine print and for failing to ask questions. It’s your finances, your future, you are the one that needs to deal with it and ask before you sign. It’s been a few years now, so I guess the OP has to deal with it, goodluck.

    • qwickone says:

      @BigFoot_Pete: Why don’t you get off your freakin high horse. I read my contract and yes, it’s my fault for not fully understanding what I was getting into, but apparently you’re too dense to realize that they are deliberately misleading.

      • BigFoot_Pete says:

        @qwickone: Well then here is an idea, don’t sign an IOU for $140,000 when you don’t understand the terms.

        Basic math skills would tell you, if you are going to make 50K a year in your first job, and have, let’s say 30K in living expenses, it will take you 7 full years just to pay off the principal with zero interest. And, on top of that, I doubt every dollar of extra cash is going to pay off loans…

        So no matter how misleading you thought Sallie Mae was, at the end of the day, what’s the point? You signed a contract agreeing to use money that wasn’t yours, and now you want to complain? I’ll get off my high horse, sure, or maybe I’ll just learn simple arithmetic and language skills and not take money from people I can’t pay back.

    • Jeremy82465 says:

      @BigFoot_Pete: As much as I know its probably not a word appreciated on consumerist, but you sir a douche, and I say that as a person who was 17 when they entered college, and didnt quite make that havard law class, specializing in contract verbage mind you, that I wanted to the summer prior. This person never even laid blame on anyone, just told her story and immediately you lump everyone who has ever had this into one big idiot pile? I didnt complain about it, I pay more than my monthly payments because I can, sure my interest is a bit higher, but thats the way the credit world works unfortunately. I am sorry we are not all as contract smart as you bigfoot, but for those of us that arent, and hopefully a vast majority of people, I hope you can see past the bullshit you projected onto this social commentary of a story and realise she just might be asking for some options.

      • BigFoot_Pete says:

        Fair enough, if there was no complaining, but that’s certainly not what I got from the article.

        I didn’t go to Harvard law, yet I didn’t sign myself up for $140,000 I couldn’t pay back either. See my above response, basic math would dictate that there is a lot of money owed that maybe should never have been borrowed.

  7. sponica says:

    Not a blame the OP post but 140K is really expensive for a 4 yr program…were there no scholarships?

    Granted I graduated in 2006 from a school that charged 40K a year, but I was poor and smart so they paid half my tuition, I paid some, my grandparents paid some, and I only owed 1 year’s worth of tuition when I graduated

    • ilves says:


      so you’re confused as to why someone has 140k of debt when you yourself went to a 4 year school at 40k (for a total of 160) while getting a partial scholarship and having your grandparents helping you out?

      and scholarships are very hard to get if you’re middle class or richer unless your a genius.

      • sponica says:

        @ilves: i think it’s more emblematic of a larger issue…i KNEW my college was going to be too expensive and was only going to go if I could make it cheap enough. Since it ended up costing me less than the public school with no grant aid, I went there. I wasn’t going to go if it wasn’t in my price range…but I’m just a cheap witch anyway

      • rugman11 says:

        @ilves: I have $150,000 in student loans, paid nothing out of pocket, and spent five years at a private liberal arts school and three years in grad school. $140,000 for four years is insane.

        • sponica says:

          @rugman11: well you have more than me…my 4 years of private undergrad and 3 years of public grad school have cost me 113K in principle and capitalized interest.
          not sure what your loans are or when you borrowed, but now the direct loans offer income sensitive repayment, which means I can consolidate my staffords and direct loans and pay interest only, pay some of my perkins, and dump all my money into the 40K of private loans.

          • SadSam says:


            That’s what I was concerned about, how does anyone thinkg $140,000 for undergrad is normal and appropriate (was this Harvard?)! There are some very good reasons to go to private school but I just cannot imagine being burdened by that amount of debt. State school was $8000 a year, no loans. Prof. school was $20,000 a year plus $10,000 a year for rent and food, I saved up and covered two years and took loans the last year. I had my loans paid off less than 5 years later by continuing to live like a student. Some of my classmates are still paying on their $100,000 loans (these same folks also took advantage of the expensive study abroad).

            • synergy says:

              @SadSam: Tuition, room, and board if you stay in the dorms all 4 years at Notre Dame during the mid to late 90s would’ve cost ballpark $160K. I hear it’s now in the $210K realm.

  8. mookiemookie says:

    Ok, that picture just gave me the woogies.

  9. exploded says:

    My wife recently applied for student loans from Wells Fargo (grad school, long story why we had to go to them). We got approved and then the loans went to certification. We NEVER saw an interest rate or anything. I kept waiting for them to say “here are the terms that you’re signing up for”. There was NOTHING. We couldn’t shop them around. I kept looking for some sort of documentation saying “hey, here is what you’re going to be paying in APR afterwards”.

    We ended up not having to take dispersement on them because of this, and avoided that mess. She got loans elsewhere. Still it was really scary. I can’t imagine an 18 year old having this stuff put in front of them. I was just happy to be there when I was 18. Now that I’m 27, I know what not to do.

    • Prole says:

      @exploded: Yeah, an 18 year old is not really equipped to deal with these issues. I am convinced that many student loan companies count on this and deliberately take advantage of their ignorance if possible.

      • Joseph Fisher says:

        @Prole: Not just student loan companies, don’t forget credit card companies, et al.

        Without comprehensive mandated financial education (such as a high school level personal economics class), we’re setting kids up for failure before they even have a chance at their financial life.

  10. JulesNoctambule says:

    The picture choice made my geeky morning, I have to admit. As for student loans, I didn’t take any out the first time but now I’m considering going back to school and the very idea is overwhelming. Stories like this don’t do much for that, though I’d rather know what to look out for than not to know.

    • sponica says:

      @JulesNoctambule: if you go back, see if the school has the Direct Loan program from the federal government, low fixed interest rates. AND no dealing with sallie mae (who somehow owns my stafford loans)
      depending on your field, there could also be research money to be had…

  11. conquestofbread says:

    Sorry man, but I blame the OP here.

    I have close to 40K in student loans from Sallie Mae, most of which are private.

    If I recall, the paperwork I had clearly indicated what portion of the loans I took were federal and what portion were private.

    If you’re smart enough to go to college, you should be smart enough to skim your contracts for important information such as this.

    • supercereal says:

      @conquestofbread: I’m not disagreeing as a whole (I have nearly $30K in private SM loans), but when kids head off to college, they’re generally 18 (and have never legally entered into a contract before), have never seen (and will likely never see) that much money in their lives, and are just generally not well-versed in finances. It’s really a lot to throw on a kid.

      Still, there were three things I made sure to know when signing up for my loans: the interest rates, repayment terms (grace periods, etc.), and funding source (Private, Stafford, etc). I’ve never technically read my promissory note or contract, and probably won’t ever get around to it (it’s now 6 years after graduation).

      If you’re smart enough to go to college, you should be smart enough to skim your contracts

      I think you’re asking far too much of folks from places like Ariznoa State here…

    • subtlefrog says:


      A lot of kids may skim the contracts, but just not have the understanding of what the information means – the difference between what a private vs. Stafford will mean 10 years from now, e.g. This is the problem that needs to be taken up, I think.

  12. Anonymous says:

    Same thing happened to me! My Financial aid department, we found out after the fact, was doing all sorts of shady dealings behind our backs with SallieMae and now us students are stuck with the bill. So here I am with a degree I cant find a job for in this economy and having to pay back loans I was mislead to believe was something else and working 2 jobs 7 days a week just to barely pay back my student loans and not leaving anything else to really survive on.
    Why cant they just bail out student loans? They bailout everything else.

  13. Joel Alderman says:

    Its terrible that a company like sallie mae is allowed to stay in opperation, i had almost an 800 credit score 2 years ago…they allowed someone to take out a loan with no signature in my name, the money was sent directly to that person not my school without my knowledge! guess what im stuck with the bill after getting a car loan at the bank i found out about a “default loan” on my report! Sallie mae will not talk to me other than to say i “cosigned” a loan and they will continue to rock my credit and disqualify me from student loans….F*** sallie mae

    • paradisefound24 says:

      @Joel Alderman:

      You need to sue them. If they can’t prove they gave you the money (they have no signature!), then it’s on them, not you. (And as always, remember to sue them, the person who okayed the loan, and the unspecified person they sent the money to – if necessary, you can name them John Doe in the initial papers and request the information from them about where they sent the money). At the very least, talk to a lawyer, because this sounds like one of those cases where they’d also be forced to pay your lawyer’s fees.

    • SadSam says:

      @Joel Alderman:

      Sue them and make them produce your signature.

  14. Brazell says:

    @Conquestofbread — you’re entirely right. If you’re borrowing $140,000 in loans READ THE FINE PRINT, hell just read the print in general. WHen something is a private loan, government subsidized (ie, ELM, etc), or federal, it is very clear. The article reading that the person “Assumed it was a Federal loan.”

    Why is anybody assuming anything when they’re borrowing $140,000?

    I do place some responsibility on the financial aid office of the school too. I worked in Enrollment at a private college ($40k/year) for three years prior to the job that I have now and while we’re a smaller school that gives much more attention to the students, most offices can spare a few minutes to run over your options for financial aid. Ultimately, it benefits the school — if a host of grads aren’t paying their loans off, it’ll be harder for the school to qualify for state, federal, and private programs.

    But, the responsibility falls on the borrower for “assuming that these were federal loans.” Who’s she think she is getting a federal loan like that, the auto industry?

  15. larrymac thinks testing should have occurred says:

    Oh dog, Brooks Institute. They’re already in some trouble for over-promising employability after over-paying for their program. Run, run away.

    • Trai_Dep says:

      @larrymac: Yeah, these for-profit “schools” are abysmal. They’re rife with all sorts of abuses. There are several of them that also do dodgy things to get their “students” approved for loans.
      I don’t think they should be eligible for state-subsidized or guaranteed aid. Financing these shady schools should be on a completely separate track than the ones used for certified schools. They’re sucking money from the legit schools while victimizing conned students.
      There’s a great deal to be said about sucking it up and following the traditional route.

  16. dianashotko says:

    Shamefully, this happened to me in 2000.

    I thought they were government loans with a low interest rate. It’s my own fault because I didn’t take the time to read the paperwork properly.

    Original loan amount: $10,279
    Interest Rate: 14.99%

    Since then, I’m in a debt consolidation program that actually took private student loans and lowered the interest rate (a bit) and I’ll be finally rid of this by 2012.

    Current balance: $9168.25
    Interest Rate: 10.75%

    • synergy says:

      @dianashotko: Not to be snarky or anything and it sucks in your case, but I’m glad to see you take responsibility for not reading the paperwork properly.

    • JiminyChristmas says:

      @dianashotko: To me, the ripoffs students these days are subject to are absolutely unbelievable. 10.75% is still a very high interest rate for a student loan. I have a credit card, which is also unsecured debt, with an interest rate of under 7%. And I’m not some high net worth individual who is getting super sweet offers for cards either.

      So, a lender charging 10.75%, much less 14.99%, on a government subsidized unsecured debt means they must be raking in the profits. Even better, you can’t discharge the student loan debt in bankruptcy and the can garnish your wages for non-payment. What a racket.

  17. blindtheskies says:

    My student loan story:

    I graduated HS in 2001. I managed a stellar GPA and got full scholarships to a few state schools. I was stubborn and decided I’d rather go to the more competitive and science minded private school, who offered me partial merit aid. I graduated with my BS in 2005 with ~$99,000 in student loans. With all the interest added in, when I started making payments 6 months after graduation, I was over $120,000 in debt. My payments were over 1000 a month. I couldn’t afford to pay my students loans and live on my own at the same time. I was lucky enough to be able to live with my boyfriend, I don’t know what I would have done if I didn’t have that option.

    I soon realized that as a scientist, I can’t climb very far without an advanced degree. I went back to school for my MS in 2005 and paid the ~35,000 for the degree out of pocket with a payment plan. I put my student loans on hold, paying whatever I could scrape up toward the loans to try and keep the interest at bay. I finished my MS in December of last year and started paying my loans in full again in January 2009. Over the course of 4 years, the interest rates on my loans dropped from 7.5 to 3.0% and my required payment dropped from 1100 to 800 a month.

    When I initially started paying my loans I was extremely depressed. I felt cheated and misled. When I took the first loan out, I was 18, barely an adult, and all I knew was that I didn’t have the money to go to school, my parents didn’t have the money to pay for me to go to school, and all I had to do was call up Sallie Mae, give them my SS# and I could go to school. No one ever made any mention or showed me anything telling me that when I graduated I had to come up with $1100 a month. As a new graduate, that was over half my take home pay each month. Once I paid my loans, car insurance, gas to get to work and for food, I had next to no money left. Forget about saving anything. It was a hard pill to swallow.

    Should I have known how difficult it would have been? Maybe. Is this my own fault? Sure, I can own up to that that. But I was really blind sided by how much I was going to have to pay each month. My school really had me convinced that a degree from them in my chosen field was going to get me a high starting salary and paying my loans would be no problem.

    In total, (I just looked at my account and added it all up) I have paid 18,513.68 toward my loans since 2005. But with the capitalized interest and my inability to make payments while I was in school, I still have a balance of 110,075.97, on an original loan of 99,000.

    I feel for the OP, I really do.

  18. oblivious87 says:

    I ended up getting most of my college paid for using CitiAssist loans from Citibank… right now, I’m paying less then 3% interest on it which is more then half the interest rate I’m paying on my federal loans.

    Sure, they aren’t locked in at that rate and they will probably go up, but I plan on paying off my college loans in 5 years rather then 10 like they are suggesting and if this happens within the next 5 years, I’ll just consolidate all of my student loans into a new loan with a locked in interest rate between 4%-6% and pay them off just as quickly and pay a little bit more in the end.

    It’s not hard. The person who wrote in just failed by not knowing what she was doing before taking a huge sum of money.

    • Cat_In_A_Hat says:

      @oblivious87: Less than 3%?? You my friend are quite lucky. My CitiAssist loan is at 7.25% right now. I recently entered a grad program and am paying part loan and part out of pocket since 1. I hate being in debt and 2. the amount of interest I can deduct from my taxes is not enough to entice me to wait as long as I can to pay off my loans. Based on the schedule I’m following now I should be done paying off my student loans in about 9 months.

  19. Nocturne says:

    So, question for the loan savvy:
    I’ve still got at least 3 years of college ahead of me. I’m on federal loans provided by Citi and private loans from Wells Fargo. I did my homework and shopped around, but the best was still a 5.5% variable APR. (It’s probably gone up 3% since then…) I plan on paying these back ASAP once I can and not nurse them.
    I’m going to have to borrow more for the next few years, so… will I be screwed? Any tips to avoid screwage?

    FAFSA really likes to screw over people who are trying to learn to pay their own way through college by automatically assuming the parents are paying. Not everyone wants to be a leech, and not everyone’s parents want their kid to leech off them, especially if FAFSA thinks a third of the family income will be “contributed” to college!

  20. Anonymous says:

    When I signed up for college I was naive enough to believe that Sallie Mae actually WERE “champions for higher education”…

    Now I’ve got over $160,000.00 in loans to pay back, with unreasonably high interest rates (that SM won’t consolidate). No one will consolidate my loans because, unsurprisingly, my debt/asset ratio is ridiculous.

    Throw that on top of the world’s worst customer service (no, really) and I’m living in a nightmare for the next 40 years of my life.

    Luckily I have a steady job, and make enough to afford to survive while shouldering a $2000 monthly minimum payment.


  21. vdragonmpc says:

    I have to say to anyone that defends Sallie Mae and any other ‘guaranteed lenders’ know this:

    I worked for a school for several years and watched the scams ECMC and Sallie Mae pulled while financing students with either no income or low income. They preyed on people who believed the phrase “do you know windows? Yes, well you can become a MCSE in 12-18 months or a Nurse in 12!” Lots of people got jobs in those fields after graduating from those ‘career schools’ /sarcasm…

    My personal experience with Sallie Mae was sobering. I only had a small loan with them but they jacked my credit all over the place because:
    1. I changed from a 2 year community college to a 4 year university. They put me into repayment, added all that out of school interest to the balance and then nailed me for not paying while I was full time at the school.
    2 I thought I would save money by taking some classes at a community college and take a class at university (they transferred) Sallie Mae ate my savings by saying I wasnt in college because 2 classes at a different school and 1 at university is not full time.
    3 They graduated me 3 times at the end of the fall semesters my sophmore, junior and senior years. Great fun fighting them while I am trying to deal with finals. (they threaten your next semesters federal loans and credit)
    4 I was in deferment but magically would not be later. I have great pops in my credit report from having to call and re-instate the deferment I was in.
    5 I tried to pay them off and couldnt get them to get it done for 3 months. We played over the phone from august to october and I ended up paying an extra 700$ fro 3 months due to their fees, interest and outright shenanigans.

    You have zero arguing power and no negotiating. Nothing can be done and they will tell you they will get what they want. I was told this many times over the years and they did rape me for every penny they could. When the made the mistakes and had me in repayment while I was a student they never took out those fees and interest. They just added it in.


    I wrote them a check and they can all die alive in a slow burning fire.

    • vdragonmpc says:


      Whoops 2 classes at one school and 2 at another.

      • DollaValueLIFO says:


        So you took the cash, and then decided to spend it how you wanted to (choosing cheaper CC vs more expensive 4Y classes) in likely violation of your loan app and you want to know why they hammered you?

        • vdragonmpc says:


          College is College. My Direct Loans did not do this. Sallie Mae did. They were also more than willing to add extra interest when they ‘pre-graduated’ me all 4 years I was in school. I wish I could have recorded the responses when I asked them who had ever graduated from a 4 year university in 1 year.

          They were and are scum.


  22. dham says:

    I signed a Sallie Mae loan knowing it had a 14% interest rate, because I needed money to cover housing that year. I knew the rate was bad, but Sallie Mae and Citibank were recommended by my university, so I thought it was my only option.

    Considering that Sallie Mae and Citibank both PAID my university to promote their services above other banks, yes, I do think it’s fair to blame them for this kind of thing. And I don’t care what you sign: 14% on a student loan should be illegal.

    That said, that loan is now paid off and I have only federal loans (averaging 5%) left. The friends who took out $120,000 from Sallie Mae now owe $1000/mo minimum. Sure, you can say even an 18 year old should have the foresight to do the math and figure out it’s a bad idea. But you could also easily say a company knows no 22 year old grad has an extra grand a month.

  23. Anonymous says:

    I was laid off from my job. After almost two years my unemployment had long since run out and I considered going back to school. In a desperate last-minute decision I chose to go to law school (I had to overnight my applications for school and for the LSAT to make it in time.)

    I had already been to grad school (masters) and I knew I would go into debt. I applied, and was approved for the maximum amount of financial aid including federal loans. I figured that would take care of it.

    Fast-forward to the first day of school — my financial aid check (including my loans) was less than half of the money for my tuition, let alone room and board. By that time I had already moved to another state, bought supplies, and was pretty much stuck.

    I had a choice: I could quit school, lose all the money I spent getting there, and go back to being unemployed…or I could apply for direct loans to cover the rest.

    I didn’t even own a credit card until I was laid off. By the time I started school my credit rating was trashed, and they wouldn’t give me the loans without having my retired parents cosign.

    The interest rate wasn’t much worse than the federal loans, but it sickened me that as an adult I would still have to have mommy and daddy cosign for me to get an education. If something happens to me…

    Anyway, the story gets worse from there, but the lesson of the story is that going to law school requires a lot of money up front and a good credit rating for the rest. But if I had that, I wouldn’t have gone back to school in the first place.

  24. pal003 says:

    Need to be careful with University and Student Loans. There was a known Kickback scheme going on for years.

    “Citibank, one of the largest providers of student loans, as well as five universities have agreed to pay $5.2 million to students and the New York State attorney general to resolve an investigation into student loan practices, Andrew M. Cuomo, the attorney general, announced yesterday.”

    “Mr. Cuomo has singled out in particular a practice he called “egregious,” in which loan companies give universities back payments that rise along with the volume of private student loans from the schools. Private loans are not secured by the federal government.”


    So for those who always blame the borrower – there are plenty of stories (crimes) about the Lenders and the University and their Financial Aid Corrupt and Deceitful Practices.

  25. lifeonvinyl says:

    I got a student loan from Sallie Mae for my Junior year of college. It used very vague language, both my mom and I thought we were getting a federal loan through Sallie Mae. It wasn’t until the interest was going to be raised on federal loans that we found out it wasn’t.

    When it was time to consolidate loans I put in my application to consolidate my loan from Sallie Mae with 2 other Federal Stafford Loans I had received from South Carolina Student Loan (SCSLC). After several months I hadn’t heard anything back on whether or not it had gone through. I called SCSLC to check the status and they said they were only waiting on a lender verification form from Sallie Mae. I took it upon myself to speed the process up and called Sallie Mae. Over the course of 2 days I spent over 4 hours on the phone being bounced from one CSR to another. No one was able to give me the information I needed, most didn’t seem to know what I was talking about. Had I been a consumerist reader at the time I would have known to ask to speak to someone higher up on the food chain.

    I made a call to SCSLC to see if there was anything they could do and they said they could just call and get things taken care of. The next day SCSLC called back to inform me that my loan with Sallie Mae was a private loan and that they had no legal obligation to let me consolidate it, so they weren’t going to.

    Luckily I was able to pay much more than the minimum each month and get it payed off in a little over 2 years.

  26. tbax929 says:

    My best friend took out private loans to cover her year abroad in Italy. I told her she’d better stay in school forever; when she has to start paying, she’s in trouble.

  27. Samuel York says:

    Same thing happened to me all when I was 19. I went to a state college w/ in-state tuition. I wrestled w/ FAFSA and other federal financial aid means, but they all turned around essentially saying that my parents could afford my college tuition. They were very wrong.

    I don’t remember the details of the transaction as I’m going on 26 and have put much of that out of my mind. I went w/ partial federal and private. To summarize all of it ended up being private.

    When I graduated in ’07, I had 4 loans for the 4 years of college. My loans totaled 40K before interest, they were more than doubled, around 82K when I graduated. I was in a battle w/ the company, AES, my loans had interests between 8.5-12.5%. My payments were $800 a month. Being a recent graduate, 2 part-time jobs with 50-60 hours a week just trying to keep up w/ my payments, I was desperate to get someone to consolidate. After a few months, Sallie Mae was the only one to consolidate. Since I had private loans, the only thing anyone could do, as well as Sallie Mae, was consolidate to just private loans.

    As of right now, I pay $400 a month w/ a 2.5% rate. My loans are down to 74K, so I’m not looking forward to the economy getting better because that interest rate will begin to rise.

  28. Anonymous says:

    I think most people are overlooking the basic idea here. The media and society have convinced us to believe that we need a college education to succeed in the world. That piece of paper only means that you some how scrapped up the money pay for such institutions. You would not believe how many grads work at Starbucks or Barnes and Noble. The other factor is how does 120K a year justify the pay bracket the grad will be in after? That is a lot of money for very small chance to earn enough to pay it off quickly. Really….how important is a university degree these days?

  29. Anonymous says:

    There was only a small mention of fault of the actual school. I was young and had a lifelong dream of being a photographer. Brooks Institute sold me that dream at a very very high cost and I will be spending the rest of my life paying for it. Going over the high tuition and little federal aid, I questioned the enrollment officers many times before enrolling as I was very concerned about paying the loans back. Every time I brought it up they “promised” me I would have absolutely no problem paying them back “in a couple of years” because they were the best and guarantee job placement after graduation. After graduation the job placement emails were more on the lines of “taco bell is hiring down the street” not the $50K+ they assured. I wanted to believe them and thought this was an answer to my dreams. A few months before I was to graduate, the school almost lost its accreditation because of their shady enrollment policies. Although I value the skills I was taught at Brooks they do not come close to what I will spend on it. I know I was young and very naive a hard life lesson I now have to face. While most of my friends are off getting married, buying houses and having babies, I sacrificed those things when I signed my life away. I felt completely misled even down right scammed.

    Oh and I wouldn’t be surprised if the school was receiving kick backs from the loan companies.

  30. JiminyChristmas says:

    Overall, this is a very sad state of affairs. Way, way back in 1996, when I started graduate school at a state university, tuition costs were low enough and Federal Direct Loan limits were high enough, that the government loans would cover 100% of my education costs, including living expenses. At the time, I didn’t know anyone who had to resort to private student loans.

    The max you can borrow now on Direct Loans is $5500 for your first year and $6500 per year afterwards with a max total of $31000. Undergrad tuition at my state university is over $10000/year. Live and eat on campus and you can add $4500 for that.

    So, do the math, and a typical freshman needs to come up with $9000 beyond the Federal loans. Even if you work part-time, your parents have some savings, and maybe you get some scholarships, that is a lot of money to come up with. Ergo, small wonder that so many people borrow so much from private lenders.

    As for the young lady mentioned in the article, I feel pretty sorry for her. $140,000 is a shit-ton of money, and I think vanishingly few undergraduate degrees are worth going into that much debt for. Maybe if she’s an Ivy League grad with something lined up at Goldman Sachs she can make a pretty easy go of it. Otherwise, it’s going to be a huge drag on her finances for the next 25 or 30 years.

  31. datruesurfer says:

    My friend was smart, he took out an education line of credit from a credit union. With a co-signer, he got enough money to finish school, at a rate very close to federally backed Stafford loans.