"My father asked if there was somewhere else we could get the loan and they said no. The school didn't accept money from just any bank," Torres said.
Torres said she didn't learn the rate on her loan until after graduation, when she got the bill. The variable rate rose as high as 18.5%, which requires a monthly payment of $650 -- more than twice what she makes in her part-time job.
For The Record
Los Angeles Times Tuesday, January 20, 2009 Home Edition Main News Part A Page 2 National Desk 2 inches; 72 words Type of Material: Correction
College loans: A Dec. 27 article in Section A about the costs of college loans said lawyer Marja Lopees spends about 40% of what she makes to pay off her student loans, including $88,303 she accrued in private loans. Lopees said her debt burden has lessened since she was interviewed and she no longer spends 40% of her income on her debt, but she declined to provide current income or debt figures.
She said that she couldn't make the payments, and that Sallie Mae had not responded to her efforts to renegotiate terms.
An investigation last year by New York Atty. Gen. Andrew Cuomo found an "unholy alliance" between lenders and hundreds of schools across the country.
Charging more than a dozen lenders with wrongdoing, Cuomo cited a pattern of bribes to financial aid officers making decisions about which lenders would appear on school-preferred lender lists and "revenue-sharing" kickbacks -- in cash or products -- to schools that led their students to specific companies.
Hundreds of colleges agreed to abide by new ethics rules and not to accept gifts, and half a dozen even refunded money to students. The U.S. Department of Education tightened its guidelines to discourage quid pro quo arrangements.
More than a dozen student lenders, including Sallie Mae, Bank of America, Citibank and JPMorganChase, paid a combined $13.7 million to settle Cuomo's charges, without admitting or denying the allegations.
Private litigation continues, however. Torres is one of dozens of students who are suing Sallie Mae, alleging deception and discriminatory practices that left low-income and minority students saddled with the highest-cost loans.
Andrew Meyer, the Tampa, Fla., attorney handling the case, said his law firm gained insight into Sallie Mae's practices from people who formerly worked there as loan officers.
A key strategy was to make students believe the loan officers worked directly for the college, he said. Meyer said Sallie Mae purposely sent disclosure forms a month or more after classes had begun so that students would be less likely to protest onerous terms.
Sallie Mae's Holler said she could not comment on litigation, but she defended the company's lending practices.
"It's risk-based pricing," she said. "Students can take advantage of an interest rate decline, like we've seen in the past several months, but the loan rates also have the potential to rise when there is a rising rate environment."
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