Students who take out a loan to fund college are making a terrible decision in almost every case. These loans are not necessary. There are ways around debt for college. But most students don’t understand this.
This woman signed the loan agreement. She did not read the document carefully enough. She thought it gave her a fixed rate on the combined loans. But there was no clause that said that the lender could not break these loans into separate loans, and then charge more. It allowed the lender to hike the interest rate.
Immoral? No doubt. But such things happen.
The lender sold the loan to another lender, which then started hiking the rate.
Your credit card company can do this. This is normal in signature loans. This is why bank loans are safer.
Here is her story. Don’t let it become your story or your child’s story.
I have the misfortune of being a victim of [X] student loan services. My story begins in 2004-2005 school years. I co-signed for my daughter’s student loans to a private college. The master promissory note gave great terms-4.3% $230/month fixed for the life of the combined loans. At some point AES acquired the loans and we have been bombarded with outrageous rate increases for no apparent reason.
How could happen? The rates have been hiked. Here is how.
In approximately February of 2011 the loans were split into two separate loans, each $131/month but still remained with [X]. We have paid on both loans, and resolved any issues prior to this incident. Without warning in December of 2011 my daughter received a notice stating her monthly payment will increase to $231/month in March of this year. In addition the balance would increase from $32,000 to $44,000 approximately $12,000 added to interest! This makes the total amount of both loans from the original borrowed $40,000 to approximately $76,000!! They have also threatened to add another $5,000 to the total balance with an additional $100 which would increase the total monthly payment to $350/month! When we pressed [X] for an explanation to this ridiculous increase we were told, via phone and email, “…the terms of the original contract have been changed…” What does that mean?! Who gave the authority to add $12,000 to the total sum?! At no time did either of us give permission to increase a loan. This loan has been in good standing and was not delinquent, so how can they do this to us?!
It will take a lawyer to get her out of this trap.
Anyone who co-signs a note for a student is handing his financial future over to the lender.
Don’t do it. Ever.