December 1, 2008

Should private student lenders profit from the Bailout?

Posted in Misc at 9:39 AM by Joe From Boston

Not according to consumer advocacy groups.  According to the Washington Post, “Student advocacy groups are urging the Treasury Department to prevent a new $200 billion consumer-lending program from benefiting private student lenders, which they say are largely unregulated and prey on students with risky, high-interest loans.”

Remember, these are the loan programs that were the focus of the conflict-of-interest scandal last year.

While Federal loans offer wonderful consumer protections, private loans are largely unregulated and cannot be dissolved even in bankruptcy.

These advocacy groups are recommending that private student lenders not be bailed out, or if they are bailed out then force regulations upon them that protect consumers from predatory lending.



  1. Hi Mark,
    No one arguing that private student lenders are just banks, affected the same as everyone else.

    What these advocates have an issue with is the fact that mortgages, car loans and federal student loans all have recourse in case of severe financial difficulty – deferment, forbearance, or liquidity in bankruptcy. With private loans, you’re stuck. It’s difficult to get a forbearance and they cannot be dissolved in bankruptcy.

  2. Mark C Brown said,

    The turbulence that hit the capital market had serious impact on lending institutions, especially private lenders who are mainly dependent on liquidity from investors, unlike federal lending programs…

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