Shareholders Share the Sins

One of my students contacted me the other day- she wanted to know if she could take a one-semester leave from our private college and take courses instead at a local community college. She said that she was finding the tuition unaffordable, despite her scholarships and aid. I will be talking to her after our break, but today I read another article on lenders exploiting college students. Kathy M. Kristof, in her LA Times piece, "Personal Finance Student loans turn into crushing burden for unwary borrowers" describes the predatory practices and gross abuses of students. Here's a great extract...**For a glimpse into how lenders operate, The Times filled out online loan applications with JPMorgan Chase & Co., Sallie Mae and MyRichUncle. An 18-year-old student who began college this fall agreed to provide personal information, including her Social Security number, so that lenders would provide detailed loan terms. JPMorgan Chase, the giant New York bank, did not disclose its interest rates or fees in the online application. Sallie Mae, which is based in Reston, Va., disclosed an interest rate and fee, but an attached disclaimer in capital letters said the numbers were preliminary "and may change." The third, MyRichUncle, a New York-based student loan firm formed in 2005, disclosed a variable rate that starts at 9.6% and said there would be an unspecified origination fee. The loan companies provided a bit more information over the phone. A MyRichUncle representative said its origination fee would be 2%. A Chase agent said the variable rate would start at 7.5% with no origination fee, and Sallie Mae said its variable rate would be 8%, also with no fee. After initially resisting, agents for Sallie Mae and Chase both agreed to provide summaries of the loan costs in writing. But the one-page letters they mailed did not include the total cost of the loan over time. The Times then called all three lenders to discuss their practices. MyRichUncle co-founder Raza Khan said that the failure to state the amount of the origination fee in the online application was a mistake and that the information was now included. Sallie Mae spokeswoman Martha Holler maintained that the company's disclosures were adequate. JPMorgan Chase spokeswoman Mary Kay Bean said the loan terms would be sent after the loan had been approved, pointing out that the company was not required to do so beforehand. "We send borrowers a letter with the rate," Bean said. "We comply with the law. That's it."****
The fund managers and shareholders of these firms share the profits and the sins of the managers committing them. Doing anything for a buck seems to be the mantra of the day. I had shown a video on this same topic to my students, and one of the students commented that this was one of the things she took away from the course.

As Cat Stevens once sang,

"..hope you make a lot of nice friends out there,
but just remember there's a lot of bad and beware,

Oh baby baby it's a wild world,
it's hard to get by just upon a smile"