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Monday, December 09, 2019 {{ new Date().getDay() }}

by Marian Wang, ProPublica.

 

Much like the mortgage market, the market for private student loans has gone through a big boom and a messy bust. Some banks and lenders played fast and loose with student loans, aggressively marketing them to borrowers who couldn’t afford that amount of debt, according to a new government report.

“Borrowers who took out loans at the height of the boom are still suffering from those excesses,” said Consumer Financial Protection Bureau Director Richard Cordray in remarks to reporters on Thursday. The report, released jointly by the U.S. Department of Education and the CFPB, is the government’s first major study of the murky private student loan market, for which there has long been little regulation or reliable data.

American borrowers currently owe more than $150 billion in private student loans, according to the report. Default rates soared in the years since the financial crisis, and more than $8 billion in private loans are in default.

In the run-up to the financial crisis in 2008, the boom in risky private student loans was fueled by Wall Street investors’ demand for securities backed by bundles of student loans, the report said. See this graph, which draws from proprietary loan data collected from major lenders:

After the crisis, investor interest in all manner of loan-backed securities — including student-loan-backed securities — collapsed. And with less packaging and reselling of loans to fund the creation of new loans, the private student loan market has since dialed back and raised its lending criteria.

The result: private loans are now much harder for borrowers to get.

According to the report, more than 90 percent of the dollar amount of private student loans originated last year were co-signed — so if the primary borrower is unable to repay the loan, the cosigner will also be responsible for payment. That’s up from 55 percent in 2005.

Much of what the report describes — private student loans originated by financial firms often for immediate sale and securitization — is helpful context for understanding the quandary of many borrowers and their cosigners.

In June, we detailed the plight of Francisco Reynoso, a gardener in California who cosigned on several private student loans for his son between 2005 and 2007 — in the very heyday of the lending boom. His son later died in a car accident and now the bereaved father is saddled with the debt. Since his debt was resold several times over, its not even clear to whom Reynoso owes the money or may appeal to for forgiveness.

“For the relatively high number of [private student loan] borrowers currently having difficulty with repayment, it is hard to avoid default and equally hard to escape it, as compared to options available to federal borrowers,” the report explains.

Federal loans offer more flexibility and protections than most private loans — such as deferral and forbearance options or lenient repayment plans for low-income borrowers. Federal loans also are discharged if the borrower dies or suffer permanent disability. (See our reporting on the federal system for disability discharges.)

Some private student lenders, within the past year, have started to offer fixed-rate student loans, touting interest rates that are in some cases competitive with federal rates. But as Education Department and CFPB officials note, these loans are only a good deal for borrowers with exceptional credit who can qualify for the lowest interest rates and are willing to forgo the additional protections offered by federal loans.

Check out the full report. And if you’re a borrower who sees your own student loan story mirrored in this report, email us at education@propublica.org to let us know.

You can also check out the CFPB’s new tool if you’re struggling with your loan payments, or file a complaint with the agency for problems specific to private student loans.

 

Many Democrats are getting nervous about the upcoming presidential election. Ominous, extensively reported articles by two of the best in the business—the New Yorker's Jeffrey Toobin and The Atlantic's Barton Gellman—outline Boss Trump's plot to keep control of the White House in 2021 no matter how the American people vote.
Trump is hardly making a secret of it. He's pointedly refused to commit to "a peaceful transfer of power."

"Well, we're going to have to see what happens," is how he answered the question. He added that after we "get rid of the ballots"—presumably mail-in ballots he's been whining about for weeks--"there won't be a transfer, frankly. There'll be a continuation."

Of course, Trump himself has always voted by mail, but then brazen hypocrisy is his standard operating mode. If you haven't noticed, he also lies a lot. Without prevaricating, boasting, and bitching, he'd be mute. And even then, he'd still have Twitter. He recently tweeted that the winner "may NEVER BE ACCURATELY DETERMINED" because mail-in ballots make it a "RIGGED ELECTION in waiting."
Gellman gets this part exactly right in The Atlantic: "Let us not hedge about one thing. Donald Trump may win or lose, but he will never concede. Not under any circumstance. Not during the Interregnum and not afterward. If compelled in the end to vacate his office, Trump will insist from exile, as long as he draws breath, that the contest was rigged.
"Trump's invincible commitment to this stance will be the most important fact about the coming Interregnum. It will deform the proceedings from beginning to end. We have not experienced anything like it before."
No, we haven't. However, it's important to remember that Trump makes threats and promises almost daily that never happen. Remember that gigantic border wall Mexico was going to pay for? Trump has built exactly five miles of the fool thing, leaving roughly two thousand to go.
His brilliant cheaper, better health care plan? Non-existent.
On Labor Day, Boss Trump boasted of his unparalleled success in strong-arming Japan into building new auto-manufacturing plants. "They're being built in Ohio, they're being built in South Carolina, North Carolina, they're being built all over and expanded at a level that we've never seen before."
Not a word of that is true. Two new plants, one German, another Swedish have opened in South Carolina, but construction began before Trump took office. Auto industry investment during Barack Obama's second term far exceeded Trump's. His version is sheer make-believe.
But back to the GOP scheme to steal the election.
First, it's clear that even Trump understands that he has virtually no chance of winning the national popular vote. He's been polling in the low 40s, with no sign of change. To have any chance of prevailing in the Electoral College, he's got to do the electoral equivalent of drawing to an inside straight all over again—winning a half-dozen so-called battleground states where he defeated Hillary Clinton in 2016 by the narrowest of margins.
At this writing, that looks highly unlikely. The latest polling in must-win Pennsylvania, for example, shows Trump trailing Joe Biden by nine points. That's a landslide. Trump's down ten in Wisconsin, eight in Michigan. And so on.
So spare me the screeching emails in ALL CAPS, OK? Polls were actually quite accurate in 2016. Trump narrowly defeated the odds. It can happen. But he's in far worse shape this time. Furthermore, early voting turnout is very high, with Democrats outnumbering Republicans two to one.
Hence, The Atlantic reports, "Trump's state and national legal teams are already laying the groundwork for post-election maneuvers that would circumvent the results of the vote count in battleground states."
The plan is clear. Because more Democrats than Republicans are choosing mail-in voting during the COVID pandemic, Trump hopes to prevent those ballots from being counted. Assuming he'll have a narrow "swing state" lead on election night, he'll declare victory and start filing lawsuits. "The red mirage," some Democrats call it.
"As a result," Toobin writes, "the aftermath of the 2020 election has the potential to make 2000 look like a mere skirmish." With Trump in the White House urging armed militias to take to the street.
Mail-in votes take a long time to count. Things could definitely get crazy.
True, but filing a lawsuit to halt a Florida recount was one thing. Filing suits against a half dozen states to prevent votes from being counted at all is quite another. Public reaction would be strong. Also, winning such lawsuits requires serious evidence of fraud. Trumpian bluster ain't evidence.
The Atlantic reports that GOP-controlled state legislatures are thinking about sending Trumpist delegations to the Electoral College regardless of the popular vote winner—theoretically constitutional but currently illegal.
Fat chance. If that's the best they've got, they've got nothing.
Anyway, here's the answer: Vote early, and in person*.

[Editor's note: In some states, receiving an absentee ballot means that a voter can no longer vote in person* or may have to surrender the absentee ballot, including the envelope in which it arrived, at their polling place. Please check with your local election authorities.]