An investigation also needs to be made regarding Sallie Mae's "career training" loans. They are offered for private training by many institutions (mine was through a well-known culinary school in NYC) and are frequently referred to as "student loans". They are private loans which have extremely high interest rates, offer no consolidation, payment reduction plan or deferment possibilities under Sallie Mae and the company will harrass the borrower day, night with quite often very nasty statements should the borrower have trouble keeping up with payments.

Many borrowers such as myself are even told that they are not eligible for discharge under bankruptcy and this is NOT the case.

To Annoyed in NJ

How is this NOT the case?

I as well can barely repay my private and federal loans to the point that I can barely survive with my college entry level career. I was thinking of filing bankruptcy under intense pressure. However, I was told that student loans cannot be discharged.

Any Finance Corporation and or like business and ANY college that is "profiting" from this arrangement the individuals should be "JAILED"!

No wonder we have a 2 tier wage erner society. So these finance firms are raping kids over pre-arranged KICKBACKS from the colleges.

JAIL THEM ALL!

Keep up the good work ABC news.

More interesting is a list of all colleges that are profiting and or promoting same. List please!

I don't like Sallie Mae either, but they aren't the reason you can't afford to pay your loans. It's not like you don't know your loan amounts as you're receiving them. Pay attention to how much it's costing you to attend your culinary school! And don't expect the rest of the nations taxpayers to pick up your tab through bankruptcy protection. Heaven forbid you should have to pay your own bills. Does your landlord or mortgage company give deferments or payment reduction plans? NO. Do you get deferments on your auto loans or cable bills? NO. Take responsibility for your own debts and quit crying that there aren't any 'breaks' for you.

Don't throw the baby out with the bathwater. The reason many schools use preferred lender lists is to steer students towards those lenders with the best overall service and reputation. What appears to be a good deal on the surface can be shown to be a bad idea over the long haul and to the detriment to the student. Don't think so, just look at annoyed who started this discussion. There are lots of great opportunities for students. Some much better than others. Unfortunately, no one was there to help annoyed. Eliminate preferred lender lists and you ensure it happens to millions more families and students every year. No one wants to bail out a student from filing bankruptcy but there are other benefits that benefit and don't harm the taxpayer.

these students loans help us students at the time. but i hope i am able to work after graduating so that i can pay my loans back. this country is in the business as of late of cheating people and getting away with it.

Academia is only now becoming recognized as a profit generating industry. Recent legislation such as the Education Opportunity Act of 2005 and a trend in judicial reviews to apply accountability and responsibility for the actions of higher education institutions is slowly emerging as legislators acknowledge Academics has no quality control or cost regulation. The current movement of the judicial branch is to uphold the fiduciary duties owed by a university and it's individual faculty to the students according to contract law and potentially consumer protection law. For more, see Kazerooni v. Vanderbilt University (State case: 05c2380; Federal Case- Middle District Tennessee)

The cost of college today compared to 30 years ago depicts inflation over 1000 percent. These college Presidents and CEO's should be controled via government inflation index which is usually 2.3 percent.

Any college that profits from these transactions the public should be aware of their practices. Further, ABC News should dig into the salaries of their CEO's and Director Salaries including the stock options and or bonus monies. The public has a right to know of these little devils. Any colleges involved should be brought to light. As well as who at the colleges knew this was happening.

Maybe by exposing dirty laundry of all this will bring the college cost under control.

I encourage people to petition their own state attorney's office and copy their letter to the US attorney's office to call for an investigation. I had one of my loans "taken care of" by the school that sold me a student loan to learn graphic design and they didn't have computers! I picketed the Association meetings of the vocational and trade schools meetings and threatened to go to the press.
If a person cannot repay their loans they may be able to ask Sallie Mae for a temporary forbearance. Only if you fight can things change. These schools have been in "bed" with the loan programs for decades. Buyer beware, most of these trade schools etc. only train for lower paying jobs to begin with, you'd be better off apprenticing in a trade than going into debt.

Posted by No Sympathy:

You should not make blanket judgements about persons until you know their fully story. Many people file bankruptcy due to unexpected circumstances (emergency hospitalisation) and struggle for a year trying to find alternatives before having to resort to this.

I am not the stereotype of a young, irresonsible college student. I am a hard-working, single w/no children adult over the age of 40 with a graduate degree. I also once had the attitude expressed in your commentary that I was above others due to education, career, etc. It is a huge wake-up call when circumstances beyond your control put you in a situation where you realize that life can knock you down and that you should be more humble.

Im glad schools and lenders are going under investigation because I attend the Art Institute in Philadelphia and I graduate the end of this month and it seems like my money and students graduated prior has been missing out on their money. There are suppose to be reimbursements for some students but if the students dont go over their paperwork there has been instances that students found out that the school has pocketed the money. I truly think that the The Art Institutes should be part of this investigation.

I think it is time that these companies come under fire for their practices. I barrowed form sallie Mae and it was one on the WORST decisions I have ever made. I have Stanford loans as well and they have real payment plans that make since for a recent collage grad. Their payment plans start out low, below $100.00 for a couple of years and go up slowly. This is the way it should be, what recent grad has $900.00 a month to devote to student loans? Not too many, it is not an issue of not wanting to pay our loans back it is a matter of not having the funds to pay what they want.

Their payment plan consist of pay now or pay $50.00 per loan to defer them wile they collect interest, and then they jack up your interest rate. I had loans that start out at 8 and go up to 12, my car and house are not even that much how is this helping students want to get a better education and better them self’s? If you cant pay the phone calls do not stop 24 times in one weekend that is once every two HRS.

To me that is harassment but they can do it for some odd reason. This is unfair in my mind, it goes agents the vary nature of a student loan. When you sign up for your loans salie Mae and the aid officers tell you that re payment is so easy and they will work with the student to come up with an affordable Payment plan. After you graduate it is a different story. Then you find out about their two payment plans. They need to be rained in they hold all the cards in this deal; you as the barrower have no rights.

It looks as though all you disgruntled student loan borrowers out there are still in need of an education. If anyone is to blame for the unfortunate situation so many of you now find yourself in, it’s YOU and your GOVERNMENT – not Sallie Mae or any other loan provider. There are so many different types of student loans out there – and you guys are interchanging them like they're all the same. Most of us get a federally backed loan first. Lenders don’t make the rules on these loans. Your government decides how much you can borrow, the interest rate you pay, the upfront fees, how often you should be contacted should you fall behind on payments, and oh yeah – whether or not it can be included in bankruptcy.

The government doesn’t mind forgiving debts owed to private companies, but a discharged student loan is money out of their pockets (which as we know is really our pockets). Private student loans are also available. They can be expensive. “Private” means they are not federally back or subsidized. Good rates and fees are out there – but you have to be going to a real school where you actually get a degree when you graduate. You don’t think it’s a risky proposition to lend thousands of dollars to a student with no credit or bad credit, no job, and whose highest aspiration is to attend a trade school? And if you did sign up for a bad loan to attend a bad school – take responsibility for making stupid decisions.

That last post by "Where The Blame Really Belongs" said it all...Students should ALWAYS use all of thier Federal Financial Aid resources 1st...Scholarships, grants, Stafford Loans, Perkins Loans, etc. Private loans are the "last resort" loans, and have higher Interest Rates because they are higher risk...with no federal guarantees, no collateral, and nothing to "reposess" ...meaning lenders can get burned if you dont pay.

The key is education. Students/parents need to be educated on how the student loan industry works, and hopefully, if thier school is trustworthy, they can get that education through thier financial aid office, or from the "trusted" preferred lenders on thier "preferred lender list"...(which is what this story was initially talking about)

PLUS, The schools all develop specific processes with specific lenders...take that away, and I will wish all students the best of luck getting thier money on time. I think the preferred lender lists are very useful in "simplifying" the process for students, if you just leave choosing a lender entirely up to the students, most would be overwhelmed with options and make bad, uninformed choices. However, it still stands true that thier best bet is to educate themselves properly, or they will eventually have to just pay the price of ignorance.

Yes! I definitely agree with the person that posted the comment regarding the CAREER TRAINING loans from SALLIE MAE. This is out of control! I am facing extreme financial hardship right now and am unable to pay my loan currently. Sallie Mae harasses me day and night and some of the reps are very uncaring and rude! In three months my Career Training loan has jumped from $24,500 to $29,112! This is outrageous and must be stopped! I need a lot of help right now and don't know where to turn. They need to be investigated and something should be done. They give me absolutely no options for financial aid and won't give me deferment, forbearence, lower payments, ect. . Much appreciated, thanks.

Re the last post, "Sallie Mae harasses me day and night..." You have no idea how much I can relate. I had a rep once a couple of years ago tell me that they would make sure they took my parent's house away (75-year old co-signer) even I was making payments and trying to work out a more feasible payment plan with them. I filed a complaint with my state's Banking Commission and the result? Sallie Mae was on the up-and-up, etc.

I take full responsibility for the poor choice I made in going with them as a lender for training regarding a career-change. I could have opted to list them under my bankruptcy as Career Training loans are private loans, but I did NOT. I am not irresponsible and neither are so many adults that get lured into their Career Training loans by well-known and highly-regarded institutions. Those loans were described as federally-backed student loans upon presentation. And yes, for a few months everything appears like a typical student loan payment and them Boom! - your payments skyrocket, you receive no explanation and if your income does not sufficiently cover the exploding loan payments, you find yourself in trouble. The company and educational institutions in some cases are deliberately misleading persons and they should be investigated.

I have kept up with my payments for the past 2 years as a result of return to my prior career simply to earn sufficient money to make my current stated payments. But I constantly worry about what surprises about my loan may come next. In retrospect I would have been better off going to a loan shark 4 years ago.

SInce the early 90's
the US education Dept
has harrassed me to no end
through credit agencies
They have taken my Income tax
this must stop
more later...

Unfortunately, lenders or schools are not to blame for the current crisis; rather it is the responsibility of the borrower and the regulators who over see the poor practices in the lending industry. The variation of loans and the diversification of loans come in a mind numbing packages that many unsuspecting and unaware consumers or students have a hard time deciphering. Unless you have been well informed, or well coached on the negatives and positives of educational lending via private or public, you are still left with a confusion of mixed and puzzling options that would intimidate even the most astute amongst us. Buyer beware is an old school expression, but it works well here. What we have is a circus with an eighty-five billion dollar industry full of well schooled and calculating and efficient business persons.

I have the same problem with Sallie Mae and a culinary school in CA. After spending hours going over the paperwork (with a fine tooth comb) for student stafford loans our financial advisor then brought out the "remainder" of the paperwork for the "recommeded" private loan agency (Sallie Mae). She explained that it was "just like" the federal loan but from a private loan company...everything was just the same (she said)no payment until a certain time, deferment and forbearance available...blah blah blah. She conveniently forgot to mention that the one thing that WAS NOT the same was the interest rate. After 3 1/2 hours going over the first forms I took her at her word and signed the last papers. Little did I know that I had just allowed Sallie Mae to destroy the rest of my life. I graduated from culinary school at the top of my class and went out and found a job almost immediately. At an entry level I was making less than $10.00 an hour as a pantry chef. Four years later, with lots of experience and great reviews I am still making 12.00 an hour and now owe Sallie Mae almost $56,000 (my original loan was 23,000. They want me to pay them over $1000 a month. Do the math......what am I supposed to do? I was tricked in the first place and now am endlessly harrassed, as are my parents, and threatened on a daily basis with garnishment and a mound of other horrible possibilities. They have told me they will destroy my credit and make me unable to ever purchase a home or car or ever recieve an income tax refund. I have offered over and over to pay what I can but they refuse to cooperate in any way. It appears I am destined to have my loan continue to double on a yearly basis and go to my death owning nothing and in debt. Never mind that I work as much as possible in my chosen profession and that I am a good upstanding American citizen. Sallie Mae and my school have destroyed my life and those of several other people who were caught in the same web.

Annoyed in NJ is correct. There was a small window left opening after the new bankruptcy "reform" act that closed the opportunity to discharge student loans in bankruptcy. This window was closed when Bush signed the "reform" act of 2005. However, many lawyers are really not that smart or really don't care to take the time to do the "work" and therefore, it's just easier to say there's no relief. In addition, because it's such a small window, that the issue would have to be taken up on a case by case basis in bankruptcy adversary proceedings. Not all student borrowers will be able to benefit from it. Also I believe many bankruptcy judges make feel the pressure of making a decision that has a possibly of being review at a higher judical level and they don't want to make "scary" career judgements.

As for filing bankruptcy on student loans... when a person files bankruptcy, they are not saying that I don't want to pay my bills. They are saying that they are not able to meet the obligations of surviving AND be able to pay all the bills that they owe. Most people feel really horrible when they have to go to court and say I can't pay my legal obligations and support my family. The reason for such a law was to ensure that people who find themselves in such a situation would be able to start over without debt being a cause for suicide or homicide, or jail or lost of family members to debtors. That being said, in bankruptcy proceeding there are usually a lot of creditors that are not going to get payment, not just a student loan corporation. All of it is money. All creditors will felt the pinch, why should a creditor with a student loan account be any different. As for taypayers, all businesses will be able to write off bad debt on they tax filings. So it's all the same, regarding as to the type of debt being discharged in bankruptcy.