A recent college graduate struggling with loan repayment is pushing a major loan corporation to change forbearance terms for private loans.
Stef Gray, who graduated from Hunter College in New York last may, started a petition against the corporate loaner Sallie Mae, which charges a $50 per loan fee for every three-month forbearance period granted to private loan customers. Sallie Mae collected the fee as profit until more than 110,000 individuals signed Gray’s petition and rallied in support. Last week, the loan corporation announced they would readjust the terms of loan repayment to accredit such payments toward the loan balance.
Sallie Mae only charges this fee to its private loan customers and not to federal loan customers. By charging the fee, Sallie Mae is not giving the debtor any option but to pay or default, Gray said during a phone press conference.
“All I want is for Sallie Mae to give the same rights and protections to its private loan customers that is guaranteed free of charge to its federal loan customers,” she said.
Gray said she will continue to push Sallie Mae for further reform through consolidation, safety nets or income-based payments that could help student borrowers avoid default and enhance consumer protection. Her ultimate goal is to get rid of the $50 forbearance charge that is not realistic for unemployed students like herself.
“There’s so much talk about personal responsibility on the part of the debtor,” Gray said. “What about the responsibility of the lender to protect their client?”
Mark Kantrowitz, publisher of the FinAid and FastWeb websites that provide financial aid and scholarship information to students, said education on private loans is vital in protecting a student’s financial future.
“Students should exhaust all federal loan resources before even considering a private loan because federal loans are provided by the government which wants to advance higher education and will protect the student,” he said.
Sallie Mae is a for-profit organization and was up-front about the charge for forbearance in their promissory note that individuals such as Gray sign at the time they accept the loan, Kantrowitz said.
“While the level of unemployment of recent graduates has changed and it may seem that lenders must adjust to this, it seems that Gray is asking for Sallie Mae to accommodate her need after she agreed to specific terms when she signed for the loan,” he said.
Gray, who took out three student loans during her college career, said there is not enough education about private lenders. She said that these lenders are painted in a certain light of reliability, which is inaccurate because of their dual role as lender and collector.
“The student debt crisis ultimately is just a hairy, awful tangled mess and I feel like this is just starting to unravel,” she said.
Mohammed Murtuza, a human development and family sciences senior, said he would never consider a private loan despite the fact that he already accumulated $30,000 in federal loans and still has a semester left at UT.
“Education costs are on the rise and even public schools like UT are becoming harder to afford,” he said. “Learning about loans and the financial burden of college needs to be taught to students before college.”
Printed on Wednesday, February 8, 2012 as: Grad student insists loaner abolish extra service fees