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Amazon Suddenly Stops Selling Student Loans (bloomberg.com)
"The promotion has ended," a bank spokesperson said. After more than a year of preparation, Amazon's partnership with Wells Fargo to sell student loans barely lasted six weeks. An anonymous reader quotes Bloomberg:
It's another black eye for Wells Fargo's student loan business, which just last week agreed to pay $3.6 million to the federal Consumer Financial Protection Bureau to settle claims that it misled borrowers, illegally charged certain fees, and processed payments in a way designed to maximize late fees. Wells Fargo neither admitted nor denied wrongdoing.
The article cites a consumer advocate who says both Amazon and Wells Fargo were hiding the high costs of the loans, as well as their inflexible terms for repayment, in a "cynical attempt to dupe current students." The Washington Post noted that interest rates for community colleges and for-profit institutions "can climb to nearly 14%."
The article cites a consumer advocate who says both Amazon and Wells Fargo were hiding the high costs of the loans, as well as their inflexible terms for repayment, in a "cynical attempt to dupe current students." The Washington Post noted that interest rates for community colleges and for-profit institutions "can climb to nearly 14%."
Banks are incredibly greedy, no doubt. They're always looking for new fees and new ways to prey on consumers. I nearly took out a student loan with Wells Fargo a few years ago, and I'm really glad I didn't. Federal loans are pretty sketchy, too, though. It's not the government, necessarily, that's the problem. The issue is that you get assigned to a student loan servicer. Nelnet is mine, and they're a complete disaster. I've always made my payments on time, and pay a little extra along the way, but they've claimed I've missed a payment when I didn't. Then they tried to tell me I was wrong when I claimed I didn't miss a payment. Finally, I asked which payment was late and, not being able to tell me, they admitted they were wrong. The next month they again claimed I'd missed a payment and, upon me threatening to report them to the BBB and attorney general and threatening to sue them, the problem magically got fixed. I've concluded that ALL student loans are sketchy, and I can't wait to pay mine off and never look back.
I do not intend to be off-topic (and certainly hope I'm not), but I don't understand how the lucky (who have stories to tell about it) people that got BS/MS/PhD degrees managed to not pay a cent, or only a 1% fee on their loans. What did the loan "companies" have to gain from those individuals versus people with almost identical SAT/etc scores that got shafted with the generic bait and hidden-text switch regular student loan method? Is it like the way they target torrent downloaders/hosts - just do a random pick of a few in a state with hard laws and go with those?
Shrug.
Since you don't get pick which company gets to service your loan and since loans are batched up and transferred to serviced pretty much ad-hoc, it might as well be randomly assigned from the perspective of the borrower. Don't worry, it has nothing to do with your SAT score. Loan servicers bid for contracts to service loans (e.g., keep track of payments) on behalf of the holder of the loan. Like with many things, some servicers bid low and hope to make it up in fees, some might be more reputable but of course they make less money.
Not saying wells fargo (or other banks and loan originators), are without blame (no doubt they continue to do business with shady loan servicers as well), but it is also quite likely that the originator of the loan packaged your loan into a big pool and sold them to an investment company. That investment company is free to work with these shady loan servicers (and may even potentially be in cahoots with them) to squeeze out every penny from you to maximize the return on their investment. This happens with all types of loans (house, car, student, personal, etc) and is not restricted to student loans. In fact most originators sell your loan pretty much immediately to such investment companies, so they have more money to create new loans (that is how they make money).
Lest you think originators reselling loans in pools is something only underhanded companies do, two of the biggest USA government chartered companies FannieMae and FreddieMac were created for exactly this purpose: to buy loan pools from loan originators, package them up as bonds and sell them as investments. This was seen as an essential function to make sure that loan originators always had enough liquidity to finance non-FHA conforming loans (loan originators could buy GNMA insurance for FHA conforming loans and securitize them in to US treasury backed GinnieMae bonds, but not non-conforming loans).
Unfortunately, this whole idea of a secondary market for loan pools is what many believe contributed to the 2008 crash. Since investment companies were making so much money from these loan pools (buying them from originators and reselling them to investors), they wanted any loan pools they could get their hands on. Since AAA rated pools equivalent to FHA loans through FannieMae and FreddieMac were in short supply, investment companies bought lower rated
I really hate the for-profit servicers as well. "Obtuse" is a polite term for them. I really miss when my loan was serviced directly by the Department of Education.
To deal with this kind of issue (I had this with Verizon), I encode my payment amount so I can know what's paid and when. For example, let's say the actual amount due is $253.12. I'll put the month as the last dollars and the cents for the day. So making that payment on June 4th, I'd actually pay $256.04. A payment on July 3rd would be $257.03. So even if they don't post it to my account for 2 months, I know which payment it was.
Next, use your bank/credit-union's bill pay to send payments so you have an audit-trail. NEVER let them draft from your account - it's just not worth the .25% rate break.
Lastly, if they're servicing federal loans and still jerking you around, write to your senators and congresspeople. They have staff who are good at helping un-f*ck bureaucratic organizations.
I live in The Netherlands. Yes, we pay more tax than in the US, but we do get something in return for it, not just an overblown military sector or roads and bridges that are falling apart due to lack of maintenance (reminds me of the former USSR, no mainetance is often a sure sign of an empire in decline).
Government-run universities may be of low quality in the US, but our universities are top notch. Perhaps MIT or Caltech are even better, but the general level is high. And of course some students will "waste their time" on a study that is not directly usefull, or will fail to graduate. That's the risk of an investment in education. However, that risk is quite small and the large picture is largely positive. Besides, if you have not passed all your 1st year exams after 2 years the student loan is stopped anyway. That weeds out most of the students that are incapable of succeeding.
Well, of course very school is different, but it has been my observation that the people working financial aid dept for colleges are more concentrating on getting people financed (either through grants/loans), than the actual terms of that financing.
I don't blame them, I know how hard they work, and the are overworked and underappreciated, but their goal is really to get everyone matriculated to be financed (because, generally, they won't be able to attend if they aren't financed). If you want to think about it, it's like Tetris, they have lots of weird blocks of funding (grants, loans, fellowships, etc) that become available at different time to fit to the students empty coffers which appear as they matriculate and sometimes they just need to fill up a row of students because time is of the essence and they generally don't look back to see if it was optimal or not once a row of students is retired and shifted away. When it is done and the whole class is financed, they declare success and move on to their next task (raising funding for next quarter), but unfortunately it is the students that experience the indigestion that can be the result of their efforts.
The sad part of this is that most students approach educational funding the same way. If they get financed, they win, and generally don't think about the terms. People may lament the apparent unfairness of this lottery based funding system for higher education, but it is the current reality. IMO, part the issue is the fact that students often will opt for a specific educational path regardless of the cost to them specifically blindly believing that a head-in-the-sand approach to educational financing will yield them their desired result. We have sex-ed in secondary school, why we don't have financial-ed is beyond me.
Your lament seems to be reminiscent to a group of friends sitting around with some beers some complaining how some people got to have unprotected sex in high school and it didn't result in a pregnancy or some dreaded STD, yet others experienced life changing results with their singular lapse in judgement. Perhaps those that dodged the bullet, just got incredibly lucky with their inordinate risk.
Quantum mechanics tells us that end results in the universe are often only statistical, not deterministic. Since we can't live in a basement, we often need to take risks which potentially have statistical results from time to time, but we know that statistically better (but not guaranteed) outcomes result from calculated risks, not hopeful risks. We can bemoan dependence on luck, but remember, funding for anything (including higher education) is a scare resource and sometime the fairest way to distribute such a resource is by drawing straws. Sometimes you have to ask yourself if a 1550 SAT really statistically better than 1600 based on 1 sampling point taken at one point in time and if it would actually be fair to distribute resources based on a potential statistical anomaly...