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Student loan companies ‘didn’t care’ when borrowers’ debt rose: Warren

  • Senator Elizabeth Warren told Teen Vogue that high interest rates on student debt can make people “pay off forever.”
  • She added that student loan companies collecting debt prioritize profits over borrowers’ ability to pay.
  • Many borrowers are often forced to repay more student debt than they originally borrowed due to interest.

High interest rates on student loans can keep borrowers from repaying their debt for a lifetime – and a top senator says companies that collect that debt aren’t helping.

Massachusetts Sen. Elizabeth Warren, a prominent lawmaker calling for $50,000 in student debt forgiveness for every federal borrower, Recount Teen Vogue in an interview that compound interest on student loans can trick borrowers into paying off more debt than they originally borrowed, thus keeping them “paid off forever”, and student loan companies are not much help when borrowers find themselves in a bind.

“We have [also] had student debt service officers who didn’t work trying to get people into the right repayment plans,” Warren said. “They just put people in the plans that work best for the service agent. And if that meant the student’s debt got worse and became unpayable, the service company didn’t care. They still made millions of dollars in profit.”

The $1.7 trillion student debt crisis is growing every day, with 43 million federal borrowers currently in debt to the government. And although student loan payments have been on hiatus for nearly two years, many borrowers still have substantial student debt they fear will pay off on May 1, which is why Warren and some of his fellow Democrats are not only calling The student-loan industry must be reformed, but for Biden to completely cancel student debt.

As Insider previously reported, student loan interest rates are a major contributor to rising student debt. Daniel Tapia, a borrower who originally took out $60,000 in student loans, is now $86,000 in debt thanks to interest.

“What I don’t understand is that if I’ve withdrawn a certain amount, and I’ve already paid that amount, and I still owe more than I originally owed, that’s just crazy,” Tapia told Insider. “It’s mind-boggling to me that this total amount isn’t going down. It’s not going away.”

Interest rates on student loans increased in July, with undergraduate loan rates at 3.73%, rates for graduates and professionals at 5.28% and PLUS loan rates for parents and graduate students at 6.28%, and if borrowers fall behind in their payments, interest keeps mounting.

Warren has long had the student debt crisis in her sights, and while pushing for student loan forgiveness, she has frequently spoken out against abusive practices by student loan companies. More recently, for example, Navient – one of the largest companies – reached a $1.85 billion settlement over “widespread unfair, deceptive and abusive student loan management practices and abuse in granting predatory student loans,” according to 39 attorneys general.

Warren called the settlement “a major step in providing relief to borrowers and holding Navient accountable.” She also told Insider during a July interview that “the days are over” when loan companies “could do a terrible job.”

“The world has changed for student debt managers,” Warren said. “They can’t sign a contract, do a lousy job, cost borrowers tons of money and still get their contract renewed.”

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