Crackdown Looming for Subprime Student Lenders

Let our journalists help you make sense of the noise: Subscribe to the Mother Jones Daily newsletter and get a recap of news that matters.


Last month, I reported on a glaring omission in the Senate’s 1,500-page financial reform bill: private student lenders, once described by New York Attorney General Andrew Cuomo as the “Wild West” of lending. These lenders, like juggernaut Sallie Mae, who often cater to subprime borrowers, saw the dollar amount of their loans grow from $7.2 billion to $15 billion between the 2003-04 and 2007-08 academic years. Over that same period, the percentage of students with private loans climbed from 5 percent (935,000 borrowers) to 14 percent in 2007-08 (nearly 3 million). Accompanying that growth, though, have been rampant predatory lending complaints, from peddling usurious interest rates to targeting the homeless and other people obviously without the means to pay off tens of thousands of dollars in debt.

Last night, top House lawmakers announced that private student lenders’ exemption is all but dead. The House’s conferees, who together with top sentators are trying to merge the chambers’ two financial reform bills, offered new rules that would subject private student lenders—along with payday lenders, check cashers, and money remitters, among others—to oversight under a new Consumer Financial Protection Bureau. What’s more, House conferees want to mandate that private student lenders get certification from a student’s college before giving that student a private loan. This certification ensures that students are actually eligible for loans of any kind, and if so, that they’ve exhausted all options for receiving federal loan money, which carries lower interest rates and is generally safer than private loans.

These changes proposed by the House would go a long way toward to cracking down on abuses in the private student loan business, while letting the honest lenders who provide a necessary service to students go about their business. Now, it’s up to the Senate, who left these lenders off the hook in the first round, to get on board.

IT'S NOT THAT WE'RE SCREWED WITHOUT TRUMP:

"It's that we're screwed with or without him if we can't show the public that what we do matters for the long term," writes Mother Jones CEO Monika Bauerlein as she kicks off our drive to raise $350,000 in donations from readers by July 17.

This is a big one for us. It's our first time asking for an outpouring of support since screams of FAKE NEWS and so much of what Trump stood for made everything we do so visceral. Like most newsrooms, we face incredibly hard budget realities, and it's unnerving needing to raise big money when traffic is down.

So, as we ask you to consider supporting our team's journalism, we thought we'd slow down and check in about where Mother Jones is and where we're going after the chaotic last several years. This comparatively slow moment is also an urgent one for Mother Jones: You can read more in "Slow News Is Good News," and if you're able to, please support our team's hard-hitting journalism and help us reach our big $350,000 goal with a donation today.

payment methods

IT'S NOT THAT WE'RE SCREWED WITHOUT TRUMP:

"It's that we're screwed with or without him if we can't show the public that what we do matters for the long term," writes Mother Jones CEO Monika Bauerlein as she kicks off our drive to raise $350,000 in donations from readers by July 17.

This is a big one for us. So, as we ask you to consider supporting our team's journalism, we thought we'd slow down and check in about where Mother Jones is and where we're going after the chaotic last several years. This comparatively slow moment is also an urgent one for Mother Jones: You can read more in "Slow News Is Good News," and if you're able to, please support our team's hard-hitting journalism and help us reach our big $350,000 goal with a donation today.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate