Student Loans Hurt Students Because They Have Fewer Consumer Protections Rights
Student loans have far fewer consumer protections; as such, student loans hurt students. Beyond not having the legal right to declare bankruptcy on a student loan, over the years, Congress has passed legislation that removed SIX more consumer protection regulations and rights for students and parents who have taken out student loans. Bankruptcy Info
Adherence to State Usury Laws:
These are regulations governing the amount of interest that can be charged on a loan. Usury laws specifically target the practice of charging excessively high rates on loans by setting caps on the maximum amount of interest that can be levied. These protective caps have been eliminated.
The Fair Debt Collection Practices Act:
The statute’s stated purposes are: to eliminate abusive practices in the collection of consumer debts, to promote fair debt collection, and to provide consumers with an avenue for disputing and obtaining validation of debt information in order to ensure the information’s accuracy. But for students with student loans, these protections have been eliminated.
Loss of Right to Work:
The government, as a punishment for failing to make on-time student loan payments, can void a professional license that allows one to practice law, medicine, contracting, hair coloring, plumbing, etc.
Statute of Limitations on Debt Collection:
If you have old debts, collectors may not be able to sue you to collect on them. That’s because debt collectors have a limited number of years — known as the statute of limitations — to sue you to collect. After that, your unpaid debts are considered “time-barred.” According to the law, a debt collector cannot sue you for not paying a debt that’s time-barred. However, a student loan can never be time-barred; a debt collector can sue you even if your student loan is 50 years old!
The Truth in Lending Act:
It is a United States federal law designed to promote the informed use of consumer credit by requiring disclosures about its terms and cost to standardize the manner in which costs associated with borrowing are calculated and disclosed. However, banks are no longer required to fully disclose the cost calculations of a student loan. Fines, charges, penalties, and higher interest rates that magically appear on your statement are accounting practices that do not have to be justified.
No Refinancing after a Consolidation:
There isn’t an obvious mechanism for the refinancing of student loans after graduation and consolidation of the loans. In other words, once a student has graduated and consolidated his or her loans, that borrower could never leave that lender, even if there were lenders who were willing to offer better terms! There have been repeated attempts by smaller lenders to convince Congress to allow refinancing for student loans over the years, but all attempts have failed due primarily to the influence that Sallie Mae, Citibank, the Consumer Bankers Association and others have enjoyed with key legislators on the Hill.