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Killer Clause: No Fixed Rate for College Loans

Written by Gary North on July 4, 2012

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.

Continue Reading on anitacarey-achristianwomansview.blogspot.com

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5 thoughts on “Killer Clause: No Fixed Rate for College Loans

  1. icetrout says:

    How come the “Ivory Tower” crowd is immune from taking cuts in pay like everyone else in the country? Seem’s to me their the root cause of spectroscopic med-care cost & everything else…

  2. Just as the wildfires are signs of a government that can no longer afford to maintain the infrastructure, so too are the regulatory agencies useless since they provide no protection or appeal from these predatory lenders. The US has to rent these flying water bombs from Canada and even Russia, while our own retrofitted military aircraft botch the job.

  3. snakearbusto says:

    "How come the "Ivory Tower" crowd is immune from taking cuts in pay like everyone else in the country?"
    What does that have to do with the fact that student loans are predatory? Your comment has nothing to do with the subject, but it hollers out for a retort:
    By the "'Ivory Tower' crowd" I assume you mean university teachers. Do you know anything about the profession of university teacher? I can only assume you don't, because in the 40 years since I left graduate school, it has become more and more difficult for a university teacher – I mean the real ones, not the ones who do Pentagon or Big Pharma or Big Agro research – to achieve any kind of job security. I got out of the profession myself, but the people I know who are still in it are underpaid and have no job security. One of them lost his healthcare coverage, with two small kids and a wife who is unemployed. Several are being forced to take "vacation days" with no pay by the state governments they work for. Profs with tenure (that means job security) and fat salaries are a thing of the past. Nowadays a teacher who expresses a view or teaches a book that upsets some special interest group can be fired, and it happens more and more often. Then they have to start over at the bottom of the heap.
    So instead of repeating talking points you hear on the radio about how university professors are all "leftists" and overpaid, learn a little about reality.
    By the way, "their" is a possessive, not a nominative..

  4. I think we'll discover that many State Universities have become Satraps. By that I mean that Administrator are using the System to hire friends, peddle influence, get sweet heart contracts and so on. They do this in a "gray area" that insures that they do not go to jail or even face lawsuit.

    If Penn State could hide Gerry Sandusky and his serial pedophilia for fifteen years how hard would it be to hide Sweetheart Contracts, Kickbacks, Ghost Employees and other white collar crime under the guise of "Academic Freedom"?

    The average University Professor that I knew did have Progressive politics. Many of them were sincere hardworking people who cared about their work, were passionate about their fields and as long as you kept politics out of your comments were content to stick to the subject. In fact the more competent the Professor the more likely they were that you never knew if they were a Progressive, a Conservative or whatever.

    Hacks are hacks.. yes in Universities most hacks are Progressives, some are even Marxist. Such people ride along on the system.

    The Professors are the folks who add the value to Universities. Period. I don't begrudge a sincere committed Professor a penny, even if they are teaching a Soft Discipline. The ones who teach Hard Disciplines, who work or worked in Industry or in Government Research, and who share not just their Theory but how it applies, and the "Well the theory applies here but not there" are pure gold.

    The Administrators, Assistant Administrators, Office of This or Office of That, Special Outreach Programs, Athletics, Special Programs that are really Vote Buying schemes cooked up by legislatures, and so on, are probably the folks who squander the money..

  5. Yes! Finally someone writes about student loans fixed rate.