Some Lenders Attempting to Bury Students in Debt for Life

The old adage that "if a deal sounds too good to be true, it probably is" certainly applies to student loans. Some lenders are now advertising directly to students, attempting to get them to take out enormous amounts of debt that will take up to 20 years to pay back. And the advertising says very little about monthly payments or interest rates. Instead it focuses on all of the great things that the students can do with all that money while they are in college.

You may have seen some of the latest student loan advertising that has been circulating on late night television and on YouTube. The messages don't talk about financial responsibility. Instead, they focus on the here and now, talking to students about buying a new computer and improving their lifestyle. At least one of the ads on You Tube that we have looked is clearly designed to put fear into students about their current living expenses.

The hook that some lenders are using is that students can take out up to $40,000 per year in addition to federal student loans, but that they can defer payment until after graduation. Frankly, that's a very bad idea. Not only will students and their families be saddled with repayment requirements from their federally backed student loans, but they will then have additional amounts due, up to $130,000, from private loans.

There are a variety of problems with the pitches the lenders are using. This includes the fact that interest rates and repayment terms are often buried in student lending sites and not easily accessible from site navigation menus.

The interest rates on these private loans are running around 9.25% and the payment terms are up to 20 years. For a student that takes out $130,000, that's $1,100 a month in payments until sometime after their 40th birthday. By the time the loan is paid back, that student will have paid $281,000 in finance charges in addition to the original principle borrowed. That means total payments of over $410,000 for the life of the loan.

According to a study conducted by EducationAtlas, the average adult with a four year college degree makes a little over $45,000 per year. Typically, annual earnings are lower as people enter the workforce directly after completing their education. According to the National Association of Colleges and Employers, the average graduate who is fresh out of school make $30,330 in 2005. By the time an average student makes his or her monthly payments for the $130,000 borrowed from private lenders, and then makes any additional payments for other loans and credit used during school, they will be lucky if they can live above the poverty line.

As with purchasing a home, a college education is not just an investment. It is also an emotional decision. Any time that emotions are used to make a large purchase, there is significant chance that a mistake will be made. This is the time when parents really need to get involved.

Private lenders are very pointed about the fact that they would prefer that parents co-sign with their children on loans. This means that the parent is also obligated to pay the money back, regardless of how the student chooses to spend it. One of the primary selling techniques used by lenders is that they tell students that they will send their checks directly to the student. I don't know about you, but as a parent I don't like that idea at all and wouldn't agree to sign a loan with that type of provision.

Just because your child wants to go to the most expensive or exclusive school available, that doesn't mean that choosing that school is a wise decision. Parents really need to speak to their children about the issue surrounding affordability prior to sending out college applications.

Likewise, taking out a loan that is not necessary is also a bad idea. Parents need to look at the actual costs of going to school. These should include tuition, supplies, room and board. Everything above this is optional.

Parents also need to be aware that there are other loan and grant options that may be available to them. Among these are government grants, which never have to be paid back, and home equity loans with provide the benefit of keeping the parent in control of the amount of money available to the student.

Of course, there is nothing to prevent adult children from taking out loans of their own, without parental oversight. That being said, you should make it perfectly clear to your child if you will place any limitations on the help you will provide them to pay this type of loan back. College should provide a well rounded education and it really should be a lot of fun. But it shouldn't turn into an excuse to spend till the cows come home. That's especially true if you, the parent, are being asked to repay that borrowed money.

By: Guest blogger: Jim Malmberg, Executive Director, ACCESS
American Consumer Credit Education Support Services

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Hackers Getting More Professional
Online Crooks Finding New Ways To Propagate Spam And Send Malicious Software

(AP) Online crooks are quickly enlarging an already vast sales and distribution network to propagate spam and send malicious software in hopes of infecting millions of computers worldwide, according to a new report.

In a report to be released Monday, security software maker Symantec Corp. says sophisticated thieves sell code to criminal middlemen for as much as $1,000 per program. The middlemen then push the code to consumers, who may be duped into participating in a scam, or who may have their passwords, financial data and other personal data stolen and used by identity theft rings. more

VETERANS ADMINISTRATION STILL VULNERABLE TO DATA PROBLEMS, REPORT SAYS

WASHINGTON — Veterans' personal data and health information remain at risk of identity theft because the Veterans Affairs Department has yet to implement several safety measures, government investigators say.
The report by the Government Accountability Office, released Wednesday, comes more than one year after the VA pledged renewed security efforts after the loss of personal information for 26.5 million veterans and active-duty personnel.
It found that the VA had not yet fully secured access to its computer network and department facilities nor worked to ensure that only authorized changes and updates to VA computer programs were made.

Recently, the Senate Banking Committee held a hearing to learn what's going on with campus credit card marketing. They want to know what the story is - and so do we. If you have a story please consider posting it To make our case that irresponsible credit card marketing on campus must be reined in, we need to hear your story. See Student PIRG's site

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"Don't Get F#%'D" SEE VIDEO!
Source: Americans for Fairness in Lending

Are you familiar with Ashton Kutcher's cable TV hit "Punk'd"? Check out Americans For Fairness in Lending's new animated video parody about campus credit card marketing here. Then take the follow-up action steps and PASS IT ON to your friends.

Here’s why campus solicitation matters:

Credit card companies sign up students even if they have little or no income, knowing they'll trigger high "penalty" interest rates and fees. That's where they make their big $$$.

College students, young workers, immigrants, the elderly and others who are not aware of the traps get solicited the most and hit the hardest.

Free t-shirts, frisbees and pizza come at a dangerous cost. A signature can lock in very unfair terms.

More info for students

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Shelby County Deputies Break Identity Theft Ring
Suspects Stole Credit Cards, Social Security Cards, Checks
Shelby County Sheriff's deputies have arrested 3 people for breaking into vehicles and stealing credit cards, social security cards and checks. The information was then used to make purchases in several states. more

Cop killer convicted of using Pennsylvania man's identity -UTICA, N.Y
A man facing 300 years in prison for the murder of a police officer gunned down after a jewelry story robbery was convicted Wednesday of illegally using a Pennsylvania man's identity while he was being prosecuted for the killing. more

Five former employees of a Missouri poultry-processing plant have pleaded guilty in federal court to various immigration and identity-theft related violations.
All five are citizens of Guatemala. They pleaded guilty in separate appearances this morning before U.S. Chief Magistrate Judge James C. England to charges contained in separate federal indictments...more

'Iceman' Hacker Indicted For Running Identity Theft Scheme
A San Francisco man faces 40 years in prison and a fine of $1,500,000 for allegedly hacking into financial institutions to steal credit card information.
A California man was indicted by a grand jury Tuesday for allegedly running an online identity theft scheme that nabbed "tens of thousands" of credit card numbers. more

Non-residents listed on stolen PC -HARTFORD — Baffled state officials are investigating why the names and Social Security numbers of at least a dozen out-of-state individuals who have never paid Connecticut taxes were listed on a tax agency laptop that was stolen recently...more

Man targets daughter in id theft case -WILMINGTON -- Identity theft is spreading across the country and can happen any time, anywhere and to anyone. One Wilmington woman was a victim of this growing problem.
Nineteen-year-old Julie Ponteri is trying to pay her own way through Cape Fear Community College. Paying bills can be tough and things just got even more difficult. more

If your identity -and time is of value to you -be proactive when guarding it.

Two videos worth watching...

Identity theft happens many times through no fault of our own.

Funny -but all too realatable video...

My wife the slave!

If you are would prefer to have someone else guard your credit, follow this link LifeLock.com and use the
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Speaks for itself...

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The below question was asked of Mortgage Professor Jack Guttentag and addressed in his column "Ask the Mortgage Professor"

"I noticed an on-line petition to require all mortgage lenders to provide borrowers with monthly statements of their account. Is this a good cause?"

His response...“Yes, because borrowers don’t choose the firm that services their mortgage, they can’t fire the firm for cause, and their existing legal protections are weak.
A law requiring servicers to provide monthly statements that update the account and explain all changes in it, will not eliminate servicing abuses, but it will help borrowers who are alert protect themselves...” Jack M. Guttentag is Professor of Finance Emeritus at the Wharton School of the University of Pennsylvania, and founder of GHR Systems, Inc., a mortgage technology company. See entire article

Professor Guttentag's site is mtgprofessor.com

***************************************************************************************
I am very glad to see that Professor Guttantag appears to agree and understand why there is a need for borrowers to receive monthly statements for tracking their mortgage payments.

How many foreclosures could have been avoided if borrowers had the opportunity to follow their mortgage payments with the aid of a simple mortgage statement? See

It's important to note that most victims of mortgage servicing fraud have an obvious common denominator....their mortgage company didn't provide monthly statements allowing them the right to verify and track how their payments were applied, or if they were accounted for at all. Trusting -without concern that your payments are applied free of errors or fraud is leaving you vulnerable to problems you may not have considered. If you blindly trust your loan payments are applied accurately, and your loan is safe from errors or fraud you might want to re-think that stance. When your mortgage reflects an inaccurate payment history due to misapplied funds or fraud, a chain reaction of other harmful events begin to take on a life of their own.

Without the ability to track loan payments, payments made on time can be erroneously applied as late and you are none the wiser. When interest on late payments and bogus late fees are accrued, then applied, the life of the loan is extended and credit ratings are destroyed. When interest rates jump due to inaccurately reported data, those once affordable credit card payments (and insurance premiums) become unmanageable. And what started as a small problem soon mushrooms beyond control.

You may find these scenarios difficult to believe, so did I. Until, that is, making additional principal payments on my own mortgage without the aid of a monthly statement became the spark that started my epic battle(s) that consumed my life for more than a decade. It’s crystal clear to me that if I had received monthly statements, everything that transpired over that decade, would have been avoided. All of it!

After testifying before the Massachusetts Banking Committee in 1995 on the need for monthly statements, Legislators there were stunned at the picture I painted them depicting what was happening to borrowers when they couldn't track their mortgage payments. Many commented “hmmm, I pay extra principal payments too, and I don't receive a statement!...” It was their concern and attention to the facts that led banks there to begin voluntarily offering borrowers monthly statements.

Jumping ahead to 2007, there is still no mandate requiring lenders to provide borrowers monthly statements. Soon after moving to Florida I was disheartened to find my new mortgage came with a brand new coupon payment book rather than a monthly statement. And just as predicted, it wasn’t long before similar problems began to creep into my loan once again.

If a practical and common-sense measure, such as a monthly statement can assist borrowers and lenders in detecting errors and deterring fraud why must it take an Act of Congress to get them? If borrowers received monthly statements as they receive from credit card and utility companies any misapplied or "missing" payments could be found early enough to be rectified.

Obviously, the longer problems go undetected, the longer it takes to untangle the mess if and when they are discovered. It’s a sad-but-true tale but many borrowers have confirmed that had they known their loans were being mishandled, they wouldn’t have lost their homes.

For a more in-depth view see MSFraud.org

Also -a must see. story...East Bay Express News: Stolen Property?"

...For Dillon, the case has been an exercise in self-education. "This is all stuff that as a homeowner I shouldn't need to know. I shouldn't need to know what the Pooling and Servicing Agreement is," he says, referring to the lengthy pact between a mortgage company and its servicer. "I should just be able to make my monthly statements and to have them recorded properly every month, and not have to deal with this..." READ MORE

Petition link

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If students are not vigilant in protecting their credit identity, they will find more in their future than just a degree. Many of them will destroy their credit rating if they fall victim to an identity theft. A thief can easily keep them from getting their dream-job regardless of how good their education is.

It is probably no surprise to parents that identity theft continues to be the fastest growing type of fraud. But what may surprise students and parents alike -is that people in the 18 to 29 age range are the fastest growing group of victims. One need not look too far to figure out why.

Students today have grown up in a digital society. They routinely post their personal information to websites like MySpace and Facebook. Often, they provide far too much information...their full names, addresses, phone numbers, birth dates, pet names and where they like to hang out and what their interests are... leaving them vulnerable to innovative criminals. A small piece of information that may seem innocuous to many, can provide a thief with enough information to wreak havoc in your life, and finances. The more information a thief has, the easier it is for him to guess passwords, gain your trust to entice you (or someone close to you) to divulge more personal information and that can turn into big trouble. In a nutshell, what seemed on the surface to be harmless bits of information, once assembled by the thief who orchestrated his/her dream scenario -can easily turn into your worst nightmare.

But it is not just online behavior that can lead to identity theft. College kids are bombarded with offers in the mail as well as through booths that are commonly setup on campus. Among the offers they should expect will be a barrage of credit card solicitations and if not careful trouble will strike when they least expect it. When using those credit cards initially the payments may seem affordable. However, when id theft strikes, interest rates rise –and so do the payments. When unpaid bogus accounts contaminate credit reports it can take months or years to fix the mess leaving one to pay higher auto insurance and credit card payments. The payments they thought they could afford have suddenly skyrocketed and so too will their stress level! Fraud Alerts can be placed on credit reports but it's important to know they fall off every 90 days of so.

Students should start by getting their free annual credit reports (at the legitimate place). The toll free number established through Amendments made to the Fair Credit Reporting Act is 877-322-8228. It's a toll free number and automated. All three reports can be ordered in one quick call. Remember knowledge is power and in the world of credit and fraud -what you don't know can definitely hurt you!

So what can you do about it? The bottom line is to be proactive when guarding your identity, credit and your life!

Here are some tips (and warnings) to keep in mind...

1. Laptops: Stolen laptops are another vehicle to obtain personal information about an individual. Over the last 6 months 1 out of 4 data breaches have happened in colleges and universities by stealing laptops at the registrar's office. Always make sure that your laptop is password protected at all times.

2. Be watchful of shoulder-surfers and shared computers. At ATMs and community computers are targeted by shoulder-surfers. They will often hover over you to catch PIN numbers. Always delete any personal information and passwords you may have entered into a shared computer. You never know who is going to be using it next.

3. Buy a shredder and use it. Shred everything, including bank statements, credit card receipts and pre-approved credit card offers. Any personal identifying information is viewed by a thief as gold.

4. Make sure all correspondence mailed to you has your correct name and address and no variations.

5. Monitor your credit card statements, bank statements and loan statements. If you are expecting a bill that doesn’t come, contact your account holder immediately. If you see any unexpected spikes in your interest rates that can be a tip off that erroneous information is in your credit report.

6. Monitor you credit reports and look for any name, address or accounts that are not yours. Obtain your free annual credit report from the right place or directly from the credit bureaus if you have already received the free annual credit report you are entitled to.

7. Place fraud alerts on your credit reports. Remember, they fall off every 90 days or so. If you are not going to take the time to monitor and order your credit reports, consider hiring a company that does it for you. It's never just your identity they steal -it's you valuable time they rip off as well. Is your time valuable?

8. If you're moving, contact all your creditors and update them of your address changes immediately otherwise your statements and credit cards can be delivered to your old address and your address will not be reported accurately to the credit bureaus.

9. Never carry your Social Security number around with you –keep it protected. And don’t give it out to just anyone who asks.

10. Don't provide your Social Security number, bank account number or credit card number to anyone who contacts you through telephone solicitation or email. Often times scam emails and phone calls will appear legitimate –but they are imposter sites and phone numbers. If you receive a notice asking you to contact them by calling the provided 800 number, first check your statement or documents that you know are valid. Do not call a number provided in an email –or phone call unless you are positive it belongs to the legitimate party.

College ID theft news from around the web

The Kansan

Several students have reported cases of identity fraud to the Lawrence Police in the last two weeks.
Sara Shannon just wants her passport back.

"It’s terrifying, absolutely terrifying. Not only did this person screw me over royally in terms of finances and convenience, he put me in a vulnerable position. An unknown person now knows where I live, where I sleep, what health insurance I have, what countries I’ve been to, where I bank and what brand of condom I use.
-Sara Shannon, Ottawa junior

She became a victim of identity fraud when a thief stole her wallet that contained her credit card, driver’s license and passport...more

KOMO TV
College students are prime targets for ID theft
KOMO, WA - Sep 4, 2007

By Herb Weisbaum Identity theft is a serious problem -- one that is not limited to grown-ups. College students can also become victims. ...more

BG News (Bowling Green)

Q: What's 10 feet tall, bullet proof, has great earning potential and spills its guts on the Internet?

A: The typical college student.

While their actual paychecks remain to be seen, many students likely have no problem being pegged as both open and invulnerable. Unfortunately, that otherwise healthy attitude could wreak havoc with their finances, according to Todd Davis, a specialist in identity-theft risk management and founder of LifeLock, the nation's first identity-theft prevention service. more

For a 20% discount -courtesy of LifeLock use:
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