Reeling In the College-Bound

I've become convinced that the rise of the private student loan industry, while helping some students, has totally screwed many, many others such that there needs to be major reforms in regulations.  For example, I'd favor legislation that prohibits private lenders from lending to students until they have verified if a student qualifies for a cheaper federal loan and, if so, if students have maxed out and, if not, informing the students of this and require them to sign a waiver if they still want to take out private loans.  Sounds onerous (and why not require this of people who foolishly carry high-interest-rate credit card loans when they have other assets they could use to pay it off?), but this is different for two reasons: a) students are young and inexperienced and
b) private lenders benefit from all sorts of favorable government policies that guarantee student debt and (insanely) don't allow the cancellation of student loans in a bankruptcy filing.

The student loan industry could be in for more jolts. Policy makers and  regulators say that there are dangerous parallels between the private student  loan and subprime mortgage markets. In both, there have been phenomenal  profits, aggressive marketing and, until the recent credit market turmoil, a  healthy appetite from Wall Street investors.
 
And, as was seen in the subprime market, many student loans that were made  in the last couple of years are resetting at much higher rates.
 
Benjamin M. Lawsky, who is leading the state attorney general’s  investigation of student loans, says that certain practices in the business  give rise to many questions. “Are lenders making responsible loans?” he asks.  “Or are they just saddling people with debt they will not be able to  repay?”
 
In the last few weeks, Mr. Cuomo’s office has started a broader inquiry  into the industry’s marketing tactics, according to people close to the matter  who did not want to be identified because they are not authorized to speak  about a continuing investigation...
 
Industry analysts say that students  who seek private funding from a mail or Internet offer — the very business  that Mr. Meyers helped start through First Marblehead — can wind up paying  unnecessarily high rates and fees. While decades of deregulation have allowed  lenders to offer students and homeowners more loans through a broadening array  of financial products, those same forces have also curtailed government  supervision of possibly abusive practices in the lending business, critics  say.

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Reeling In the College-Bound

By ERIC DASH  <http://topics.nytimes.com/top/reference/timestopics/people/d/eric_dash/index.html?inline=nyt-per>
 September 2, 2007

ON a sunny June morning, Daniel M. Meyers stands at the helm of the gleaming, 60-foot racing yacht he bought several years ago with part of the fortune he had earned as a pioneer in the private student loan <http://topics.nytimes.com/top/reference/timestopics/subjects/s/student_loans/index.html?inline=nyt-classifier>  industry.