Courtesy of Pam Martens.
Elizabeth Warren Helped Lead the Fight to Create the Consumer Financial Protection Bureau
In February of this year, the Consumer Financial Protection Bureau (CFPB), the new Federal agency that Senator Elizabeth Warren fought so hard to create against a tsunami of backlash from Wall Street and Republican ranks, asked the public to comment on making college more affordable and to describe their student loan experiences with private lenders. There was a tidal wave of nearly 30,000 responses.
Public interest groups, nonprofit community programs, and thousands of college graduates responded. The most tragic stories came from students who augmented their Federal student loans with loans from the big Wall Street banks like Citibank, a unit of the bailed out poster child for bad behavior, Citigroup. Citibank borrowers tell horror stories of living without heat, living on food donations from friends, and watching their monthly student loan payment skyrocket without warning from $374 to $1025.53.
The levels of stress and despair that ring out from these letters should raise a cautionary red flag to every American with a conscience. These young people are America’s future.
Two prominent themes emerge from this underreported but, nonetheless, epic human suffering. First, students who took large private student loans from Citibank frequently took the option of deferring the interest until after graduation since they had no means of paying it before getting a full time job. The students failed to understand the dramatic future impact of that decision. On Federal Stafford loans, the Federal government pays the interest while the student is in school. On private student loans, that interest is added to the original principal (capitalized), creating a future time bomb in terms of how much interest will eventually be due.
As James C. wrote to the CFPB: “The primary driver of private student loan distress is the overall amount of loans that I have, and the amount of interest that accrues on a daily basis. I have only had student loans for roughly ten years, I began paying back roughly three years ago. I have had 60k in capitalized interest added to my $150k student loan debt. I feel that there should be a cap in private student loan interest rates, and a cap to the amount of money that can be capitalized.”
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